Godrej Consumer Products Ltd’s (GCPL) September quarter (Q2FY25) update highlights the challenges of tackling inflationary pressures and simultaneously pursuing growth. Its India business is likely to report high single-digit volume growth year-on-year.
Analysts expect GCPL’s Q2 domestic volume growth to be about 7%, against 8% and 9% growth in Q1FY25 and Q4FY24, respectively.
The management has decided to continue investing in long-term growth initiatives such as the rural van program and new category development. Liquid detergents have surged, with revenue growth exceeding 40%, while hair colour revenue is growing in the early teens, said analysts at Nuvama Research.
In the household insecticides category, premiumization efforts are underway, led by strong traction in newly launched incense sticks and an expected boost from the relaunch of liquid vaporizers featuring a new molecule, which should boost growth from low-single-digit in the coming quarters.
Still, not all segments are firing fully. The soap category, a core part of GCPL’s portfolio, has seen muted volume growth. Unlike market leader Hindustan Unilever Ltd, GCPL is yet to adjust its soap formulations, though it has the technology ready when needed.
“India Ebitda growth is likely to be flat this quarter due to steeper cost challenges and margin dilution in soap (partly due to HUL’s disruption), which is one third of the domestic business,” pointed out Nuvama.
Cost inflation is a worry, particularly palm oil input costs, which have been rising since March and have risen in the high teens as of date. GCPL has been gradually raising prices while absorbing a part of the burden instead of immediately passing on cost increases to consumers. While this protects market share, it also weighs on profitability.
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Global business
Meanwhile, Indonesia business is expected to deliver continued robust performance with high-single digit volume growth and double-digit sales growth in constant currency. The Africa, US, and Middle East (GAUM) business has seen declining volumes due to trade stock reductions and portfolio adjustments. Also, the currency unification in Nigeria continues to hurt its rupee sales performance even as GAUM saw double-digit Ebitda growth.
Overall, GCPL expects mid-single digit consolidated sales growth in rupee terms, with low-teens growth in constant currency. Ebitda growth could remain in the mid-single digits.
Going ahead, GCPL’s focus on new categories, such as pet care, is a factor to watch out for. While domestic challenges persist, especially in soaps, strategic shifts and steady international performance lend support to a gradually improving outlook. GCPL’s shares are down 13% from their 52-week highs seen on 11 September.
Also Read: FMCG makers to report low-to-mid-single-digit volume growth in Q2
