Godrej Consumer Products Ltd.’s second-quarter profit fell, missing estimates, on higher expenses and weak sales in Indonesia.
Consolidated net profit of the maker of Good Knight mosquito repellent and Cinthol soaps declined 25% over the previous year to Rs 358.86 crore in the three months ended September, according to an exchange filing. That compares with the Rs 410.73-crore consensus estimate of analysts tracked by Bloomberg.
Godrej Consumer Products Q2 FY23 Highlights (YoY)
Revenue rose 7% to Rs 3,391.92 crore against an estimate of Rs 3,408.23 crore.
Operating profit fell 18% to Rs 542.11 crore, compared to a projection of Rs 576.25 crore.
Margin came in at 16% against 20.8%.
Total expenses climbed 14% to Rs 2,951.38 crore, owing to high cost inventory and weak demand in Indonesia, Latin America and a few South Asian countries.
Underlying volumes fell 5% over the previous year, according to the company’s presentation. On a three-year CAGR basis, volumes grew 1%.
Sales from India business grew 8% over the previous year, driven by price hikes. Categorywise, personal care grew 18%, while home care grew 2%. Unbranded and exports saw a 26% decline in sales during the quarter.
Household insecticides performance was impacted by the delayed monsoon in the eastern and northern parts of India, according to the company.
The non-mosquito portfolio continues to deliver “strong” growth momentum and premium aerosol portfolio continues to grow in “double-digits”. Within personal care, the hair colour segment witnessed close to double-digit growth backed by a strong marketing campaign, it said.
“We continue to believe that with the relatively nondiscretionary, mass pricing of our portfolio and good performance on market shares, volume growth will return in the short term,” Sudhir Sitapati, managing director and chief executive officer, said in a statement.
The company has been struggling in Indonesia, a key market, over the last few quarters as hygiene products took a hit as the Covid-19 wave ebbed. Stubbornly high inflation also hurt overall demand. In the July-September period, sales fell 11% in constant currency terms.
Constant currency sales in Africa, the U.S. and Middle East grew 13% on the back of expansion.
Latin America and SAARC business saw sales increase 34% in constant currency terms.
“With inflationary pressures abating, we expect recovery in consumption and gross margins alongside continued higher marketing investments with a significant focus on reducing controllable costs,” Sitapati said.
Shares of Godrej Consumer Products closed 0.42% lower, as compared to a 0.47% rise in the benchmark Nifty 50, on Monday. The markets were shut on Tuesday on the occasion of Guru Nanak Jayanti.