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Godrej Soaps back in black with 300% rise in profits - Views on News from Equitymaster
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  • May 4, 2000

    Godrej Soaps back in black with 300% rise in profits

    Godrej Soaps Ltd. reported a robust jump in net profits by 304% to Rs 610 m on a turnover of Rs 7.4 bn in FY2000 over the previous year.

    The sales of Godrej brand consumer products and chemicals increased by more than 25%, while the sales of contract manufacturing and commodities trading have declined considerably resulting in decline in its income from operations by 19%.

    (Rs m) FY99 FY00 Change
    Sales 9,073 7,353 -19.0%
    Other Income 25 12 -50.2%
    Expenditure 8,589 6,348 -26.1%
    Operating Profit (EBDIT) 484 1,004 107.6%
    Operating Profit Margin (%) 5.3% 13.7%  
    Interest 598 477 -20.1%
    Depreciation 210 234 11.3%
    Profit before Tax (299) 305 202.0%
    Other Adjustments - 369  
    Tax - 64  
    Profit after Tax/(Loss) (299) 610 303.8%
    Net profit margin (%) -3.3% 8.3%  
    Earnings per share - 10.33  

    Higher growth in the profits was also led by the improvement in the operating profit margins to 13.7% in FY2000 compared to 5.3% in FY1999. The increase in profit margins is due to declined in excise duty and inventory levels.

    Other adjustments represents sale of 184.2 m shares in Godrej Sara Lee Ltd. amounting to Rs 509.5 bn which has contributed in furthering the growth in the profits.

    As part of its initiative to improve the sales, the company has launched the fairness soap Fairglow, acquired the brand Ezee & Trilo and extended the brand Kali Mehendi nationally.

    At the current market price of Rs 38, Godrej Soaps is trading at a P/E of 3.7 times its FY2000 earnings with a market cap to sales ratio of mere 0.3 times. The company enjoys the lowest valuations among the consumer products companies.



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