Mumbai: Godrej Consumer Products Limited (GCPL), a leading emerging markets FMCG company, today announced its financial results for the quarter ended June 30, 2016.
1Q FY 2017 FINANCIAL PERFOMANCE SUMMARY:
Commenting on the financial performance of 1Q FY 2017, Mr. Adi Godrej, Chairman, Godrej Group, said:
“During the first quarter of fiscal year 2017, the consolidated sales of our business increased by 9%, and EBITDA by 20%, in constant currency terms. We delivered this performance despite the sluggish business environment across many geographies that we are present in. Additionally, sales was also impacted by the unfavourable weather conditions in some of our key geographies. We delivered healthy profits driven by judicious cost control and commodity tailwinds.
Our India business performance was impacted by a stretched summer and the late onset of monsoon, which resulted in a weak performance in Household Insecticides. Our India business gross sales, excluding Household Insecticides, increased by 7%. Our international business delivered a competitive sales growth of 18% and EBITDA growth of 29%, in constant currency terms.
We are hopeful that the good monsoons in India should lead to a pick up in rural demand later this year. We should also see a boost to consumption in India, following the implementation of the Seventh Pay Commission and the passing of the Goods & Services Tax.
We are relentlessly focusing on our strategy and investing strategically in creating new growth vectors for the future. At the same time, we are driving our core to full potential, ensuring execution excellence and building on our agile and high performance culture.”
BUSINESS REVIEW – INDIA
The performance of our Household Insecticides business was temporarily impacted by a stretched summer and the delayed onset of monsoon, as compared to the previous year. This resulted in sales declining by 11%. Growth rates are however improving, post the monsoon picking up. We continue to maintain our leadership position across formats in the category. We also remain focused on driving our innovation momentum. In July 2016, we launched the Good knight Neem Activ+ Liquid Vapouriser, Good knight Neem Fast Card and Good knight Neem Activ+ Coil LUP pack (4 coils in a flowrap at INR 12).
We delivered an early double digit volume growth in our Soaps business. Our sales growth of 1% was impacted by deflationary pressures. We strengthened our value added soaps portfolio with the launch of the Godrej No. 1 Germ Protection soap in the health and wellness space. We are backing our new launches with competitive media investments. Our margins continue to benefit from lower palm oil prices. We continue to remain competitive on sales promotion investments and consumer offers.
Hair Colours sales increased by 4%, led by high double-digit volume growth in Godrej Expert Rich Crème. The new communication on Godrej Expert Rich Crème has helped further improve sales momentum and penetration levels. Godrej Expert Rich Crème has now become the first crème hair colour to reach one crore households. We have also launched a new media campaign in powders, to improve sales going ahead.
Godrej aer now ranks number 2 in the overall air care market. The recently launched aer pocket has received a very encouraging response from consumers and we are seeing strong offtake. We continue to gain share in the overall air freshener market due to innovation and strong execution.
Health and Wellness
Our Health and Wellness portfolio of hand washes and hand sanitiser, under Godrej protekt, has been successfully introduced in general trade.
Cinthol Deo stick
The recently launched Cinthol deo stick for men and women has been very well received by consumers. We are supporting this launch with innovative consumer engagement initiatives and communication.
BUSINESS REVIEW – INTERNATIONAL
Our Indonesia business delivered a competitive and profitable growth during the quarter. Our constant currency sales growth of 3% was impacted by sluggishness in the FMCG industry growth, which remains impacted by the overall macroeconomic slowdown in Indonesia. Our operating margin (EBITDA) increased by 230 bps year-on-year, driven by a favourable mix and lower commodity costs. HIT is now no. 1 player in overall Household Insecticides category in Indonesia. In July 2016, we cross pollinated hair colours in Indonesia with the launch of ‘NYU’ crème hair colour in a sachet format.
Africa (including Strength of Nature)
Our Africa business (including Strength of Nature) delivered a strong constant currency growth of 52%. This was led by inorganic sales of INR 114 crore from Strength of Nature and Canon Chemicals, and an organic constant currency sales growth of 14% in our Africa business. Our operating margin (EBITDA) increased by 330 bps year-on-year, driven by calibrated price increases in hair extensions, effective cost controls and a favourable mix. We will leverage the acquisition of Strength of Nature in the USA to turbo charge building our wet hair care platform in Africa.
Our Latin America business delivered a constant currency sales growth of 10% in a challenging operating environment. Our operating margin (EBITDA) declined by 340 bps year-on-year, owing to a lag between price hikes and the increase in input costs due to currency depreciation. Our hair colour brands, Issue and Ilicit, continue to gain market share in hair colours. Ilicit clocked its highest ever volume and value share this quarter.
Constant currency sales in our European business declined by 3%. This was due to the impact of unfavourable weather conditions on the sales of Soft & Gentle and Riemann, and counterfeit issues in Bio-Oil. Our operating margin (EBITDA) increased by 180 bps year-on-year due to a favourable mix and relatively lower contractual Advertisement & Promotion spends.
Note: The figures for the current quarter may not be comparable with those of the corresponding quarter of the previous year, because of the acquisitions made since then.
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