Godrej Consumer Products says Argentine Peso devaluation to have negative mid single digit impact on sales

Godrej Consumer Products, the FMCG major, on Friday said that the currency devaluation in Argentina has resulted in a negative mid single digit impact on the company’s consolidated sales performance in the third quarter of FY24, while its overall impact on profitability remains minimal. The company’s statement comes after the recently elected new Argentinian government’s decision to devalue Argentine Peso to US Dollar.

In December 2023, the Argentine Peso to US Dollar was devalued from 361 to 808. “We believe the larger actions being taken by the Argentinian Government are progressive as they will aid economic growth in the long run, thereby further improving consumption. These steps would also improve forex availability, easing economic activities in the country," said in a stock exchange filing on Friday.

As per IndAS 29, all amounts need to be restated into the measuring unit current at the end of the reporting period by applying a general price index. As the Argentinian economy is facing hyperinflationary pressures, accounting regulations require the YTD Statement of Profit and Loss to be translated at the closing rate for presentation in Consolidated Financial Statements, it added.

Hence, the impact of the devaluation of the Argentine Peso of the financial statement for 9MFY24 has been recorded in the 3QFY24. “This has resulted in a negative mid single digit impact on consolidated sales performance in 3QFY24," Godrej Consumer said. Further, the profitability of the Latin America and SAARC business has been flat in 1HFY24.

Hence, the overall impact of devaluation on profitability remains minimal, the FMCG major added. In its business update for the quarter ended December 2023, Godrej Consumer had said it expects to see a low single digit sales decline in rupee terms at a consolidated level. On a consolidated level (organic), the FMCG company expects to deliver mid single digit volume growth in the third quarter of FY23.

It expects double digit constant currency sales growth but low single digit sales decline in rupee terms due to GAUM (Godrej Africa, USA, and Middle East) and LATAM currency and hyperinflation accounting impact. “Reported volume growth is likely at high single digit and reported sales growth to be flattish in INR terms.

We continue to drive year on year expansion in EBITDA (incl. Forex) margin despite significantly higher category development investments," Godrej Consumer had said. The Latin America or LATAM business revenue has been severely impacted on account of the sharp devaluation in Argentinian Peso from 361 to 808 which due to hyperinflation accounting has impacted nine months of revenue, it said.

At 1:55 pm, Godrej Consumer shares were trading 0.52% higher at 1,161.50 apiece on the . Livemint tops charts as the fastest growing news website in the world to know more. Unlock a world of Benefits! From insightful newsletters to real time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away!.