Godrej Consumer Products (GCPL) on Tuesday posted a 25% year-on-year decline in its net profit at Rs 358.86 crore for the quarter ended September as volumes fell due to inflationary pressures.
Revenue from operations grew 7% on year to Rs 3,391.92 crore, driven by pricing growth, even as the consolidated volumes declined 5% during the quarter.
The company missed the Bloomberg estimates for the quarter which had pegged the company’s net profit at Rs 400.70 crore and sales at Rs 3,404.80 crore.
Operating margins declined 450 basis points to 17.1% because of high cost inventory, a significant increase in working media investment and category development efforts.
Sudhir Sitapati, MD and CEO, GCPL, said with the relatively non-discretionary, mass pricing of the company’s portfolio and good performance on market shares, volume growth will return in the short term. Moreover, with inflationary pressures abating, a recovery in consumption and gross margins is expected alongside continued higher marketing investments with a significant focus on reducing controllable costs, he added.
The company’s India’s business, which contributes around 60% of the consolidated sales, saw sales grow by 8%, driven by pricing. The Ebitda margins in India contracted 300 bps year-on-year at 21.6%.
GCPL saw a strong growth momentum in the personal care segment at 18%, with double-digit growth in personal wash and hygiene as well as hair colour categories within it. The home care segment saw a 2% on-year growth with the household insecticides performance impacted by a delayed monsoon in the eastern and northern parts of India.
GCPL said that with significant correction in commodities like palm oil derivatives and crude oil, it expects recovery in consumption, gross margins expansion and upfront marketing investments in the upcoming quarters.
In the international business, in which Indonesia contributes 12% to the company’s consolidated sales, Indonesia saw sales drop by 8% on year with the Ebitda margins declining 930 bps at 17.1% due to consumption of high-cost inventory and upfront higher marketing investments.
For other international businesses — Africa, US and West Africa — sales grew in double digits but operating margins declined 270 bps on year at 9.2% because of category development and significant increase in working media investment.