Mumbai, Sept 24: Godrej Soaps has roped in consulting firm Booz Allen & Hamilton to draw up a strategy to improve the position of its chemicals division in the international market, managing director Adi B Godrej said on Friday. The chemicals division has been facing major problems in the last few years. It has, however, reported a turnaround in June-July this year, with the turnover improving by 30 per cent over the previous year, Godrej told shareholders at the company's 11th annual general meeting on Friday.Godrej also said that in order to rejuvenate the company, internal teams have been set up to act on how Godrej Soaps can leverage its crucial assets -- brands.Announcing the company's performance in the first five months of the current financial year, Godrej said the growth in sales has been 19 per cent in the Godrej soap brands, 21 per cent in toiletries and 31 per cent in chemicals.``The year 1998-99 was not a good year for the company. This was the first time in 30 years that the company posted a loss. However, we are determined that this should be the only year of loss ever,'' said Godrej.
Stating that various measures are being taken to ensure better profitability in the next quarters, Godrej added: ``The year 1999-2000, very clearly, will be a year of turnaround.'' The benefit of low raw material prices this year have helped the company in improving its profitability.
The company posted a loss due to various factors like the high levels of vegetable oils in the international market and low capacity utilisation in the sale of soaps. The company is taking several steps in the year ahead to ensure that the performance in the current fiscal is better.
After having posted a 400 per cent increase in profits in the first quarter of the current fiscal, Godrej said that the growth in profitability will be accelerated in the following quarters. This, Godrej said, will enable the company to invest more in advertising and promotion. The company plans to increase its adspend by 20 per cent-30 per cent this year. It has also successfully reduced its working capital by Rs 40 crore to Rs 150 crore.
This is expected to improve the profits and the debt-equity ratio, Godrej said. Among steps already implemented by the company to restructure operations, it took back control of sales and distribution of consumer products from Godrej Sara Lee and created separate focus areas in chemicals and consumer products.
Commenting on the recent spate of financial restructuring announced by the group, Godrej said, ``We are exploring further opportunities of financial restructuring in the next 6-18 months. These would further help to improve profitability.''
The company had earlier hired Andersen Consulting to working on an Operational Efficiency Enhancement Programme aimed at reducing costs and generating recurring savings. This would lead to a cost saving of Rs 15-20 crore per annum on a recurring basis.
Besides, Kotak Mahindra and Lazard Credit Capital have also been assigned a task to work on financial restructuring plans.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.