Godrej Consumer Products Sees Mid-Single Digit Sales Growth In Q3 Amid Subdued Demand

Godrej Consumer Products Ltd. estimated on Friday a mid-single-digit growth in organic sales in the October-December period due to subdued demand conditions in India seen in the last few months.

"The standalone business is expected to report around flattish UVG and around mid-dingle-digit sales growth in this quarter," according to provisional business updates released on Friday.

The 20-30% year-on-year increase in palm oil and derivative prices has had a notable impact on the soaps segment, the company said in the exchange filing. The segment accounts for approximately one-third of Godrej Consumer Products standalone business revenue.

To mitigate the impact of rising costs, the company had to hike prices, reduce the grammage of key packs, and it also scaled back certain trade promotions.

According to Godrej Consumer Products, these pricing adjustments generally have minimal effect on overall category consumption; however, they do lead to lower inventory levels across wholesale and household pantries. The FMCG firm in the next few months expects normalisation in volume growth once prices stabilise.

In addition, adverse weather conditions—including delayed winters in the North and a cyclone in the South—have affected the Home Insecticides segment, which represents around one-third of Godrej Consumer Products standalone business. This has impacted the segment growth for the current quarter.

The inflationary environment is putting pressure on the margins the company added. Despite these challenges, the company remains committed to strategic investments in areas like media and rural van distribution. As a result of these factors, the company sees a temporary dip in margins below the normal range of 24-27% in this quarter.

The international business is doing well, with Indonesian business expected to deliver mid-single-digit volume growth and high single-digit sales growth. On the other hand, Godrej Africa, USA, and Middle East business is expected to see a decline in volume due to a reduction in trade stocks and portfolio simplification.

Shares of Godrej Consumer Product fell as much as 1.14% during the day to Rs 1,230 apiece on the NSE. The stock closed 0.75% lower at Rs 1,235.45 per share. This compares with a 0.12% decline in the benchmark Nifty 50. It has risen 18.94% in the last 12 months.