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Godrej Consumer Q3 results: South India sales offset poor show in North and West

Godrej Consumer Products has been facing a slowdown in North and West India for the past 5-6 quarters, and hopes that the market has finally bottomed out

twitter-logoNevin John | January 30, 2020 | Updated 00:03 IST
Godrej Consumer Q3 results: South India sales offset poor show in North and West

Godrej Consumer Products (GCPL), which posted just one per cent rise in India sales at Rs 1,492 crore, faces rough weather in Northern and Western states while its newly launched shampoo hair colour and household insecticide found traction in the South. The two-year compounded annual growth rate (CAGR) of the sales stood at 4 per cent because of the slowdown in the upper parts of the country.

A company official said in a conference call that GCPL has been witnessing a slowdown in the North and West regions of India for the past 5-6 quarters. "We hope that the worst is behind us and the market has bottomed out. We have started seeing improvements in growth in the rural markets compared to the urban ones. In the last quarter, the rural market has grown 3 per cent more than the urban," he said.

The third quarter volumes in India have increased by 7 per cent for GCPL. However, the adjusted earning before interest, tax, depreciation and amoratisation (EBITDA) was flat at Rs 432 crore. The net profit without exceptions and one off items increased by 2 per cent to Rs 338 crore, said the company.

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The company's household insecticides segment continued its recovery and posted a 3 per cent value growth. The initial response to the recently launched Goodknight Gold Flash Liquid Vapouriser in South India has been encouraging, and we plan to scale it nationally in this quarter, the company said.

"We will continue to have a strong new product development pipeline to help strengthen the portfolio going forward and drive growth in the near future," GCPL said.

The discounts and consumer offers resulted in a four per cent dip in sales of soaps for Godrej Consumer Products. "We continue to gain market shares driven by effective micro-marketing initiatives and impactful consumer offers," it said.

The hair colours segment has delivered a soft performance on the back of general slowdown because of its discretionary nature, besides the consumers stretching their consumption. The company has maintained its market share in the category in the third quarter. Another product which performed well in South India is Godrej Expert Easy 5-minute Shampoo Hair Colour. The company has scaled it up nationally.

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For the economy waiting for a consumption-driven boost, the Budget 2020 will be crucial. The fast-moving consumer goods (FMCG) industry expects that the Budget will improve ease of living, boosting disposable incomes. Measures like smoothening of labour laws, improved sanitation, investment in agricultural infrastructure and water security are long-term in nature and will have a long-term impact on improving rural incomes.

FMCG companies have been underperforming for a year now owing to a slump in rural demand, which is finally exhibiting early signs of revival. Motilal Oswal said in a report that higher inflation would translate into higher wages for farmers, while the lowering of farm input cost increase their margins. An increase in rural spending by the central government and expected high yield in the rabi season are expected to support the rural consumption, the report said.

"With few definite signs of improvement in the economy in the myopic future, we do not expect much improvement in Indian FMCG sector until Q3 FY21," a CARE Ratings report recently said. While categories such as dairy and consumer goods are under pressure, the personal care category is expected to bear most of the brunt of a demand slowdown and its revival is expected at least after the next six to seven months, the report added.

ALSO READ:Slowdown blues: FMCG growth in 2019 contracts to 3-year low

The Rs 4-lakh crore FMCG sector will close fiscal 2020 with a 9 per cent growth, down 4 percentage points and a jump in rural buying will lift the same to 11 per cent in fiscal 2021, CRISIL Ratings said in a report. The recovery in growth for the FMCG sector will begin playing out from March-April 2020 riding on a jump in farm incomes, it said.

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