Godrej Consumer Q3 update: Firm expects margin dilution, low volume growth

Godrej Consumer Products Ltd (GCPL) on Thursday said it is expecting a low volume growth and margin dilution in the third quarter ending December 31, 2021 due to some short-term challenges such as unprecedented inflation during the period.

The Godrej group FMCG arm expects to deliver close to ''high single-digit'' sales growth in the domestic market, largely driven by pricing, the company said in a regulatory filing.

''We witnessed broad-based sales growth in both, our Home Care and Personal Care categories,'' the company said in a quarterly update for 3QFY22.

In the international market, GCPL said it expects a ''marginal decline'' in constant currency sales growth in its largest overseas market Indonesia.

''In Godrej Africa, USA and the Middle East, growth momentum continued across most of our key countries of operations. We expect to deliver constant currency sales growth in the teens. We continue to focus on driving sustainable, profitable sales growth,'' said GCPL.

At a consolidated level, GCPL will continue to leverage its category and geographic portfolio and expects to deliver close to ''high single-digit sales growth." 

''We continue to remain on track with our objective of driving double-digit sales growth as seen in the first nine months of the financial year,'' said GCPL.

In Q3FY22, GCPL expects ''high gross margin dilution'' and ''EBITDA margin dilution'' due to cost inflation.

''On the profitability front, we expect our quality of profits to improve with sequentially expanding gross margins, however, lower on a year-over-year basis due to unprecedented cost inflation,'' it said.

In line with its strategy of driving category development, GCPL had sequentially higher marketing spending.

''The net result would be a dilution in operating margins during the quarter, on a year-over-year basis,'' it said.

The quarterly updates will be followed by a detailed performance update, post the approval of the 3QFY22 financial results by the company's board, it added.

GCPL's total revenue from operations in Q3FY21 was at Rs 3,055.42 crore.

Shares of Godrej Consumer ended Rs 946.50 apiece on BSE on Thursday.