Godrej Consumer Products September Quarter Profit Rises

Godrej reported that its net profit for the quarter that ended in September swelled 12,56 percent from a year ago.

Godrej Consumer Products Ltd on Wednesday stated that its consolidated net profit in the quarter that ended in September soared 12.56 percent from a year ago to Rs361.95 crore on higher sales volumes.

 The packaged consumer goods manufacturer said that its India volumes swelled 10 percent, while consolidated revenue during the quarter rose 2.47 percent on year to Rs2, 496.93 crore.

“Post GST, the trade channels are getting back to normal and consumer offtakes have improved. We remain optimistic that consumer demand will continue to pick up in the second half of the fiscal year,” said Godrej’s executive chairman Nisaba Godrej in the statement.

Most of the growth that was shown in its India business came from the soaps venture, which ballooned 26 percent year on year to Rs460 crore.

The company is the owner of soap brands Godrej No. 1 and Cinthol, and it said that Godrej No. 1 increased its market share during the quarter, although it did not divulge any specific figures.

As for household insecticides and hair colors, the company reported a 4 percent year-on-year growth. Household insecticides business gained Rs671 crore, while the hair color business earned Rs130 crore.

The household insecticides business is the company's largest business.

While being the company’s largest business, household insecticides including Good Knight saw lower growth due to its coming off a large base of the quarter in September, the company said in its presentation to investors.

“Growth to some extent was impacted by the weakness in formats like coils, which are more dependent on wholesale channel,” said Godrej in a statement.

Vivek Gambhir, the managing director of the company, said that overall, the wholesale was back to 80-90 percent of the historical normal.

“The challenge remains in the east. By the end of the financial year, we expect this growth to be back,” said Gambhir.

He also indicated that rural growth has been marginally coming ahead of urban, although they were expecting that the second half would be much better.

“Typically, rural has been growing 2x of urban, but we have not seen that yet. But with higher MSP (minimum support price offered to farmers for their produce) on the back of a good monsoon, it should be much better going ahead,” he said.

Adding that the growth exhibited in soaps was from the increased sizes of the soaps market, he explained that the additional market share gained from smaller local players also contributed significantly to the growth. These smaller local players were not able to compete well under the GST (goods and services tax) regime.

In addition to that, Gambhir said that price drops in soaps that amounted to 6-7 percent with lower GST rates also contributed to the company in its market share increase.

“Somewhere in the middle of the quarter, the company would have passed on the benefits of GST to the consumers, which would have helped them gain traction,” said equities analyst Kaustubh Pawaskar with brokerage firm Sharekhan.

Under GST, soap bars get taxed at 18 percent, which is five to six percentage points lower than in the former value added tax (VAT) regime.

“GCPL has said that it has gained market share in the soap business, which would have come from small players since HUL, the market leader, also posted double digit growth in the personal wash space. Post-GST, small players don’t have the ability that large players have to give promotions to wholesalers and shops to restock the product. Also, GCPL passed on the benefit of lower GST sometime during the quarter which would have helped growth,” he said.

Gambhir added that about 10 percent volume growth is substantial recovery and indicates that rural demand is also reviving.

GCPL’s shares settled at Rs967 on BSE on Wednesday, gained 3.49 percent from the previous close, while the benchmark BSE Sensex settled at 33, 600.27 points, up 1.17 percent.

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