Godrej expects improved consumption in second half of this fiscal

Godrej Consumer Products Ltd (GCPL) expects consumption to improve in the second half of the current financial year, mainly due to moderation in inflationary pressure amid correction in commodity prices.

The company's forecast also comes against the backdrop of the country's FMCG industry continuing to remain soft amid slower growth in rural markets.

"We expect a mid-single-digit volume drop, with a low single-digit 3-year volume CAGR. Personal Care sustained its strong double-digit growth trajectory, while Home Care witnessed close to mid-single-digit growth," the company said in its quarterly update for the three months ended September. In value terms, GCPL expects to "deliver high single-digit sales growth".

On the profitability front at the consolidated level, the Godrej group firm anticipates a "mid-teen decline in EBITDA". EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation.

"This is due to consumption of high-cost materials, significant upfront marketing investments to drive category development, and a weak performance in Indonesia," it said.

However, with significant correction in the prices of commodities like palm oil derivatives and crude oil, GCPL expects a recovery in consumption, gross margins expansion and upfront marketing investments in the upcoming quarters.

About the Indian FMCG industry, GCPL said it continued to remain soft during the quarter and rural markets witnessed slower growth compared to urban markets.

"However, with the moderation in inflationary pressures due to correction in commodity prices, and the monsoon largely being on track (apart for a few states), we expect consumption to improve in the second half of the year," it said.

In the domestic FMCG market, GCPL's key brands include Good Knight, Hit, Cinthol and Protekt. It has presence in segments such as Household Insecticides, Hair Colour, Air Care, Fabric Care and Personal Wash and Hygiene.

While in Indonesia, a key market for GCPL after India, it expects "expect early double-digit constant currency sales decline". "In Godrej Africa, USA, and Middle East (GAUM), we continued our growth momentum across key countries. We expect to deliver constant currency sales growth in the low-teens. We are expecting constant currency sales growth in upwards of the thirties in our Latin America business," as per the quarterly update.