Godrej Consumer Revenue Meets Street Expectations, But Low Volumes Hurt Margin

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Godrej Consumer Products reported quarterly revenue in line with Street estimates on Wednesday, helping the stock recoup some of the day’s losses, although a drop in brand volume weighed on its margin.

Stock giant FMCG – whose brands include Cinthol, Good Knight, Ezee and Just for Me – edged closer to the flatline after the earnings announcement but failed to reach the green.

Godrej Consumer recorded a net profit of Rs 345.1 crore for the April-June period, down 16.6% from the corresponding quarter a year ago thanks to a 6% decline in volumes in India.

Its revenue rose 8% year-on-year to Rs 3,125 crore for the three-month period, according to a regulatory filing. Analysts in a CNBC-TV18 poll had estimated the FMCG company’s net profit at Rs 365 crore and revenue at Rs 3,125 crore.

The company saw strong momentum in personal care, but underperformed in home care.

Revenue from the home care business fell by 4% to Rs 663 crore, and that from the non-branded unit and exports fell by 6% to Rs 63 crore, according to a statement.

Personal care revenue, however, jumped 25% to Rs 1,088 crore, Godrej Consumer said.

Godrej Consumer Products’ EBITDA margin – a key measure of operating profitability – fell to 16.7% in the quarter ended June, from 20.7% for the corresponding period a year ago.

Analysts had estimated the margin at 17.1%.

The company expects a recovery in consumption as well as its gross margin. Its management said the consistent performance was due to prices.

“We continue to believe that with the relatively non-discretionary mass pricing in our portfolio and very strong market share performance, volume growth will return in the medium term,” said Sudhir Sitapati, CEO of Godrej Consumer Products.

He said the decline in EBITDA was due to unprecedented global commodity inflation, initial marketing investments and weak performance from the company’s businesses in Indonesia, Latin America and SAARC.

The company’s national brand volume – comprising homecare and personal care businesses – fell 5%, in line with analysts’ estimate of 4-5%.

(Edited by : Sandep Singh)

First post: STI

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