Godrej Consumer Q3 net profit up 5% on one-time gain, revenue rises 8%

Fast-moving consumer goods company Godrej Consumer reported revenue in line with street expectations but surprised with net profit growth for the quarter ended December 31, 2021.

Godrej Consumer’s net profit rose 5% to Rs 528 crore from Rs 502 crore in the third quarter of the previous year. However, this was partly boosted by exceptional items such as reversal of impairment on investment in BBlunt and deferred tax. Excluding the exceptional and one-off items, net profit declined 1% to Rs 489 crore.

The company’s revenue, meanwhile, were in line with what analysts were expecting. Consolidated revenue rose 8% to Rs 3,302 crore last quarter.

Godrej Consumer’s share price, which has lost a fifth of its value in the last five months, was down 0.6% in mid-day trading in a weak Mumbai market on Tuesday after it declared its results.

Other Key Highlights

1) Consolidated EBITDA margins at 21.4%, lower by 210 basis points year-on-year.

2) Overall sales growth was led by personal care segment, which grew 12%. Sales of home care unit was soft at 3%.

3) India business grew 8% while Africa, USA and Middle East business grew 13% in rupee terms and 12% in constant currency terms.

4) Indonesian business saw flat growth in rupee terms, and declined by 2% in constant currency terms.

5) India volume growth was flat during the quarter.

Management commentary

Sudhir Sitapati, Managing Director and CEO, Godrej Consumer, said the company delivered “a mixed performance” in the third quarter.

“While overall sales grew by 8%, and we remain on track to achieve double-digit sales growth for the full year, it was driven entirely by price-led growth. We believe that with the relatively non-discretionary, mass pricing of our portfolio and very good performance on market shares, volume growth will return in the medium term,” he said.

Sitapati also said that, while overall EBITDA fell by 2% and profit after declined by 1%, the “quality of profits” has improved. “We have witnessed sequential expansion of consolidated gross margins of 70 bps and higher advertisement and publicity spends of 90 bps,” he added.

“We continue to have a healthy balance sheet and our net debt to equity ratio continues to come down. We are on a journey to reduce inventory and wasted cost and deploy this to drive profitable and sustainable volume growth across our portfolio through category development,” Sitapati said.