Godrej Consumer Products: Another Strong Quarterly Performance

Godrej Consumer Products (GCPL) announced its March 2014 quarter and FY14 results. Financial performance of the company has been strong where the topline as well as bottomline both witnessed a good traction. Let’s first take a look at the financial performance of the company for the March 2014 quarter.

For the quarter ended March 2014 the company posted a consolidated topline of Rs 1931.52 crore as against Rs 1721.53 crore posted in March 2013. On the bottomline front, the company has posted a PAT of Rs 248.83 crore as against Rs 334.14 crore. One may think that the performance of the company is not good at bottomline level. However, March 2013 quarter had an extra ordinary income of Rs 129 crore. If adjusted for the PAT for the last March 2013 quarter would have stood at Rs 205 crore. Performance has also improved on the sequential basis also, as for the December 2013 quarter the topline was Rs 1982 crore and PAT was Rs 196 crore.

As on the full year basis the consolidated topline for FY14 stood at Rs 7602.41 crore and bottomline at Rs 759.73 crore as against Rs 6416.30 crore and Rs 796.1 crore (including Rs 129 crore of extraordinary income) respectively for FY13.

Let’s take a view on the different segments. First segment is the household Insecticides. Here the sales growth returned back to normalcy at more than 17%, well ahead of the category. GCPL continues to drive market share gains aided by success of Good knight Fast card and HIT Anti Roach Gel. Here the management stated that, “We believe our new launch Good knight Xpress LV will bring further gains to GCPL franchise. We also have ramped up our production capacities to adequately take care of expected future demand”.

In the soaps category sales value growth was at 1%, well ahead of the category growth which is facing significant pressure in terms of consumer off-take. Category de-grew both in value and volume terms in mid to high single digits respectively.

In the hair colour segment the company managed to sustain its momentum by delivering more than 16% growth.

On the international segment front, in Indonesia the business registered healthy constant currency sales growth of +12% (excluding the foods distribution business). HIT and Stella continue to strengthen their market share positions. INR sales growth excluding foods business was 5%. EBITDA margin was healthy at 18% (before payment of technical and business support fee and excluding impact of distribution arrangement for the divested foods business).

Africa delivered a strong quarter. Sales grew by 39% with a healthy 15% EBITDA margin. Constant currency sales growth was 33% for the quarter. GCPL continues to strengthen and build processes and talent infrastructure for sustainable growth in darling geographies. Nigeria became the first darling business to come under 100% GCPL control.

Latin America had a good quarter with 28% sales growth in constant currency terms. INR growth was 5%. Sales growth was led by market share gains and new product launches.

European business reported a growth rate of 16%. The European constant currency growth was negative on account of weak January (wettest January since records began) and higher base effect in S&G. Base was significantly higher for S&G driven by pent up demand from supply gap during business transition from its erstwhile owner to GCPL. EBITDA margins were down yoy due to lower sales leverage, higher A&P spends, and high base.

The performance of the company has been very good. We recommend the readers to hold the counter with a perspective of next one year.