Godrej Consumer Products share price falls over 5% as it expects low single digit sales decline in Q3

Godrej Consumer Products share price declined over 5% in early trade on Monday after the company reported its business update for the quarter ended December 2023. Godrej Consumer Products shares fell as much as 5.80% to 1,149.00 apiece on the . The fall in Godrej Consumer shares comes after the FMCG company said it expects to see a low single digit sales decline in rupee terms at a consolidated level during the quarter ended December 31.

In its Q3FY24 business update, said the operating environment in India continues to remain similar to Q2 and its organic business delivered steady underlying volume growth of mid single digit. “Growth was broad based across both Home Care and Personal Care. Park Avenue and KamaSutra brands continue to perform well and are on track to achieve full year ambition.

Reported volume growth continues to be double digit," said Godrej Consumer Products. The FMCG major’s Indonesia business reported nearly double digit volume growth and high single digit constant currency sales growth. The GAUM (Godrej Africa, USA, and Middle East) business had a flattish to mild decline in volume growth.

“This was driven by trade destocking in geographies that we plan to restructure in Q4. Although it sustained double digit constant currency sales growth, the impact of the Naira devaluation will result in high single digit sales decline," the company added. 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.

“This is likely to have a negative impact of mid single digit on the consolidated sales. However, the impact on profit is minimal. Despite the challenging environment, the LATAM business continues to deliver positive volume growth," the FMCG company said. On a consolidated level, (organic) Godrej Consumer Products 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 INR 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 said. Nuvama Institutional Equities expects Godrej Consumer Products’ consolidated revenue, EBITDA and PAT to grow 0.2%, 10.9% and 9.4% YoY.

The brokerage firm estimates India business to grow 4.5% with 4% volume growth. On the margin front, Godrej Consumer Products shall see margin expansion in core and RCCL portfolio. It expects RCCL to add sales of 1.5 billion for the quarter. “The company has cut down overhead costs in RCCL meaningfully while cost synergy benefits have started to flow in Q3.

With this, we expect EBITDA margins to expand 227 bps to 23.6%. Price cuts that Godrej Consumer Products had taken previously are now in the base. Hence, we do not see negative pricing growth in the quarter," Nuvama Institutional Equities said. It has a ‘Buy’ call on the stock with a target price of 1,250 apiece on the BSE.

At 11:00 am, Godrej Consumer Products shares were trading 3.77% lower at 1,173.85 apiece on the BSE. 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!.