Godrej Consumer Products Expects 'Flattish' Sales Volume Growth In Q3

Impacted by an increase in soap prices and unseasonal rainfall slowing down sales of the home insecticides segment, Godrej Consumer Products Ltd. expects a “flattish” underlying volume growth and a mid-single-digit sales growth in the domestic market in the December quarter.

Both segments jointly contribute to two-thirds of GCPL's standalone revenue—mainly income from operations from the domestic market.

However, the rest of the portfolio is demonstrating good performance and is expected to deliver double-digit underlying volume growth, Godrej Consumer Products said in an update on business conditions and quarterly performance to the exchanges.

“The demand conditions in India have been subdued for the past few months which is evident in the FMCG market growth,” it said.

A surge in palm oil and derivatives prices to the extent of a year-on-year increase of 20-30% has impacted the soaps category, representing one-third of GCPL's standalone business revenue.

“To partly offset the cost increases we have taken price increases, reduced grammage of key packs and reduced various trade schemes,” said the Godrej Industries Group FMCG arm.

Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantries, it said.

It anticipates normalisation happening on the volume growth side following price stabilisation after the next few months only according to the historical patterns.

Moreover, delayed winters in the north and cyclones in south India have slowed down sales in the home insecticides segment, which also contributes one-third to GCPL's standalone business.

“This has impacted HI category growths in the current quarter,” it said.

Under the home insecticides category, GCPL operates in the home hygiene segment with mosquito repellent brands such as Good Knight and HIT.

“However, given the significant contribution of soaps and HI to the overall business mix, the standalone business is expected to report around flattish underlying volume growth and around mid-single digit sales growth in this quarter,” it said.

According to GCPL, these are “exceptional situations in standalone business” that the management believes are transitionary and not structural.

“Hence the management remains focused on navigating these near-term challenges while maintaining strategic investments for long-term growth as these negative trends are likely to persist for a few months,” it added.