The share price of Godrej Consumer Products fell 10% in early trading on Monday following the FMCG company’s poor mid-quarter business update, which highlighted demand difficulties. On the BSE, Godrej Consumer Products’ stock fell as much as 10% to ₹1,112.05 per share.
“The demand conditions in India have been subdued for the past few months which is evident in FMCG market growth. Despite the demand conditions, GCPL has over the past six quarters consistently delivered an average organic UVG of ~7% on the back of category development supported by innovations and media investments,” Godrej Consumer Products said in its mid-Q3 business update.
A third of Godrej Consumer Products’ sales come from its soaps category, which has been affected by the 20–30% YoY increase in palm oil and derivatives prices.
The company claimed that to partially offset the cost increases, it has raised prices, decreased the grammage of key packs, and scaled back several trade schemes.
“Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry. Historical patterns indicate a normalization in volume growth following price stabilization, which we anticipate occurring in the next few months,” the company said.
Additionally, the business noted that the growth of its Home Insecticides segment, which accounts for one-third of its standalone business, has been hampered by unfavourable weather conditions.
“The rest of the portfolio is demonstrating robust performance and is expected to deliver double-digit UVG. However, given the significant contribution of Soaps and HI to the overall business mix, the Standalone business is expected to report around flattish UVG and around mid-single digit sales growth in this quarter,” Godrej Consumer Products said.
The company expects a brief decline in the normative margins this quarter due to the pressure on the margins caused by the present inflationary environment.
Godrej Consumer Products anticipates that its Indonesian division will continue to perform exceptionally well, with high single-digit sales growth and mid-single-digit volume growth.
The GAUM (Godrej Africa, USA, and Middle East) organic business is anticipated to have a volume decline as a result of trade stock reductions and portfolio simplification, in accordance with its previous forecast.
“The effects of these actions would be largely completed in Q3 FY 25. However, we continue to do well on our profitability journey, and this is likely to be the fourth consecutive quarter of healthy EBITDA margins for GAUM,” it said.
The management of Standalone Business considers these extraordinary circumstances to be transitional rather than systemic. Since these unfavourable trends are probably going to last for a few months, the management is still focused on overcoming these short-term obstacles while continuing to make smart investments for long-term growth, the business noted.
