Godrej Consumer Products Limited's (GCPL) 4QFY03 numbers reflect the tough environment which the FMCG sector is facing. The company has reported a 3.2% dip in its operating income during the March quarter. The company has finished the quarter with a 22% bottomline growth, largely aided by a 70% dip in tax provisioning. The company's profit before tax was down 11% during the quarter.
Total operating income
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Tax (including deffered tax)
Profit after Tax
Net profit margin (%)
Effective tax rate (%)
No. of Shares (eoy) (m)
Diluted earnings per share*
Though Soaps (which contributes nearly 55% to sales) reported a healthy 8.5% growth, the growth in hair colour slowed down a bit. This segment grew by 14% during the quarter, compared to a 22% growth witnessed in the December quarter. However, all said and done, even a 14% growth in this environment is encouraging. The company was let down by a 33% dip in toiletries and a 17% dip in liquid detergent sales. There was no contract manufacturing revenue for the quarter.
Total Godrej Brands
At the operational level, the company's operating margins slipped to 14.3%, as revenues could not keep pace with expenses. Staff costs were down 14% for the quarter (staff costs are now linked largely to performance) and raw material costs too dipped by 6%. The company's operating margins have not been stable throughout FY03. Infact, the company's operating profit growth and profit before tax growth trend has been steadily showing signs of decline (see chart).
Advertising & promotion
As per the figures released by the company, Godrej Consumer has gained some market share in soaps and liquid detergents. But the worrying aspect is that it has lost some share in the fast growing hair colour segment and also in shaving creams. Also, the company has not stated anything on the market share of fairness cream. But as per the December quarter numbers, the company had lost significant share in this emerging business.
Source: Godrej financial presentation, ORG Data
* represents market share in December quarter 2001 and 2002 respectively
GCPL continues to reward shareholder's through its stated policy of increased dividends and/or buyback. GCPL declared its fourth and final dividend (Rs 2 per share), making the total dividend payable in FY03 Rs 8 per share. As a result of the company's ongoing 4th buyback scheme at a maximum buyback price of Rs 175 per, the company has bought back 0.3 m shares during the quarter. In the last one year, the company's number of shares outstanding has come down by 2.1 m shares to the current 57.7 m shares.
At Rs 108, the stock trades at 11.6x FY03 earnings, 1.3x market cap to sales. A buyback at Rs 175 signifies a P/E of nearly 19x FY03 earnings, 2.1x market cap to sales. Even previous buybacks have not been able to perk up GCPL valuations from the current levels. FY03 has been good so far for Godrej Consumer, but signs of decline in growth in different product segments is worrying.
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