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The consolidated net sales for the quarter ended March 2016 have increased by 8% at Rs 2269.07 crore. The organic net sales at constant currency have grown by 12%. India business net sales increased by 7% to Rs 1208 crore, India business branded net sales increased by 9% in volume including offers and 6% in volume excluding offers . International business sales grew by 11% to Rs 1075 crore. The business has grown by 18% on an organic constant currency basis driven by robust performance across geographies. Reported growth impacted by currency translation impact of 7%. Organic EBITDA margin of 15% expands 40 bps… Overall OPM increased by 91 bps to 19.5%. The profit before tax and EO was up by 14% to Rs 410.03 crore. The net profit has increased by 17% to Rs 310.07 crore
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Household Insecticides continues to deliver double digit growth, with a sales growth of 10%. This was driven by high single digit volume growth. The company has continued to gain market share across formats and ended the year with highest ever market share on a full year basis. HIT brand delivered strong growth, led by compelling awareness campaigns and effective activations. Good knight continued to lead category penetration. Gross margins continued to benefit from lower crude oil prices.
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Swach Bharat Abhiyan programme will give growth to household Insecticides business.
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Sales in Soaps business declined by 6%, due to deflationary pressures. Volume growth, including offers, was in the low double-digits. The Godrej No.1 Nature Soft – Glycerin & Honey variant launched in the winter soap space has received an encouraging response. Cinthol, premium soap brand, continues to lead volume and value growth. The company continues to remain competitive in sales promotion investments.
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The mgmt said that when palm oil is low for such extended period, we see competition in soap industry. The company has not seen any impact of Patanjali on soap business.
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Hair Colours sales bounced back during the quarter with a sales growth of 7%. This was led by a recovery in the sales of powder hair colour as well as a double-digit volume led sales growth in Godrej Expert Rich Crème. Godrej Expert Rich Crème continues to gain market share and lead distribution reach and household penetration in the crème category.
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The company said that it will focus on crème hair colour going forward and little focus will be on powder format. Since hair powder is more of rural area products, growth was low. It will pickup if monsoon is good, which will help rural growth.
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Hair colour - on crème don’t see impact on business due to competitions.
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The recently launched aer pocket has received a very encouraging response from consumers. The company has gained share in home air fresheners. aer maintains its leadership position in the home sprays air care market on an exit market share basis.
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Health and Wellness portfolio of hand washes and hand sanitizer, under Godrej Protekt, has been successfully introduced in general trade.
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Hand sanitizer market size is Rs 70-80 crore and hand wash market size is Rs 500-600 crore.
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During the quarter, company launched Cinthol deo stick for men and women in a disruptive cream format priced at Rs 69.
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BBLUNT, range of premium hair care products, has been launched in modern trade and premium general trade outlets.
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The growth rates in Indonesia business improved, with a constant currency sales growth of 13%. This performance was well ahead of the FMCG industry growth, which remains impacted by the overall macro-economic slowdown in Indonesia. The sales improved by 16% to Rs 394 crore. Operating margin (EBITDA) increased by 170 bps to 21%, driven by calibrated price hikes, lower commodity costs and the optimisation of marketing investments. HIT and Stella continue to deliver competitive performance and maintain their leadership positions.
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The company is launching Project Pie in Indonesia.
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Indonesia - market environment still tough. Home and personal care demand is still subdued, but sentiment is up for last 2 quarters. The mgmt is hopeful of maintaining the current performance gng fwd.
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The company has increased its distribution in Indonesia, added lower unit pack and huge focus on innovation. All these things give confidence of similar growth rate. Margin maintenance is challenging at this level.
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In Indonesia, the company will see rise in direct coverage by 20% in FY17, from present level of 110000 outlets.
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Africa business delivered a strong constant currency growth of 26%, led by a robust performance in the Darling business. The sales improved by 20% to Rs 338 crore. Operating margin (EBITDA) improved by 180 bps to 15%, driven by calibrated price increases in hair extensions and effective cost control. The company has completed the acquisition of 100% equity stake in Strength of Nature, LLC in April 2016. This acquisition enables to turbo charge building hair care platform in Africa.
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African business growth will moderate, but still look at double digit growth.
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Latin America business delivered a constant currency sales growth of 31%, led by a strong performance in Argentina. The sales declined by 6% to Rs 164 crore. Operating margin (EBITDA) declined by 190 bps to 19%, due to higher sales and marketing investments in Argentina and Chile. Hair colour brands, Issue and Illicit, continue to gain market share amidst high competitive intensity.
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European business delivered a strong constant currency sales growth of 15%, led by strong growth in own and distributed brands portfolios. The sales improved by 18% to Rs 133 crore. Operating margin (EBITDA) remained largely unchanged at 8%. During the quarter, launched a new range of Soft & Gentle 0% aluminium deodorants and feminine hygiene products in UK.
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In Bangladesh, there is more trouble due to competition intensity and product portfolio it is present.
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There was rise in receivables because increase in Africa business which has net working capital high than other business. Indian also seen slightly rise in receivable. Rise in inventories is due to strategic sourcing of some key raw material.
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Rural growth was high in Q3, but in Q4, both rural and urban growth was same in line. Challenges are seen in rural side. Growth is challenging in West Maharashtra and in certain areas in UP and AP.
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1.5% of Gross Margin in standalone P&L has gone in promotion.
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The mgmt is hopeful that in H2 FY17, rural demand will pick up on back of good monsoon…
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The mgmt highlights that next quarter will also see margin expansion.
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The company has palm oil inventory for next 3- 4 months.
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Debt will come down from March level.
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The growth rates in Indonesia business improved, with a constant currency sales growth of 13%. This performance was well ahead of the FMCG industry growth, which remains impacted by the overall macro-economic slowdown in Indonesia. The sales improved by 16% to Rs 394 crore. Operating margin (EBITDA) increased by 170 bps to 21%, driven by calibrated price hikes, lower commodity costs and the optimisation of marketing investments. HIT and Stella continue to deliver competitive performance and maintain their leadership positions.
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Indonesia - market environment still tough. Home and personal care demand is still subdued, but sentiment is up for last 2 quarters. The mgmt is hopeful of maintaining the current performance gng fwd.
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The company has increased its distribution in Indonesia, added lower unit pack and huge focus on innovation. All these things give confidence of similar growth rate. Margin maintenance is challenging at this level.
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Godrej Indonesia derives 40% revenues from household insecticides category, 30% from air fresheners and 20% from wipes and non-core categories like specialized fabric care (bleach) and scourers and car care form remaining ~10%
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In Indonesia, the company will see rise in direct coverage by 20% in FY17, from present level of 110000 outlets. The company plans to double its reach over the next five years
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General trade to Modern trade ratio for the company is 40:60.
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Household insecticides to benefit from double-digit growth in electrical/aerosols segment plus upside from expansion in coils/repellants via new formats. The company is not present in coils/repellants segment which constitute ~50% of the market,
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Air fresheners category growth rates remain strong in double digits
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Wipes to be driven by market share gains. The company’s current share at 50%+.
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The company is planning to launch hair care products in Indonesia in FY17 backed by innovative formats.
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Hair color in Indonesia is US$ 75-100 mn in size and the company plans to derive 10-15% of Indonesia’s revenues from hair care over the next 2-3 years
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The company is launching Project Pie in Indonesia.
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As commodity tailwinds reverse especially led by spike in crude oil prices, the company is likely to face some pressure on margins. However, it is deploying Project Pie in Indonesia, which should help sustain margins at current levels despite raw material inflation and higher brand investments
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Going forward innovation, distribution and new category will be growth driver.
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The mgmt expects 5 years from now, 3 core categories i.e. insecticides, air freshener and wipes will contributes 75% of total revenue presently from 90%.
