- Organic Volume Growth in India: 8%
- Reported Volume Growth in India: 10%
- Organic Revenue Growth in India: 6%
- EBITDA Growth in India: 8%
- International Volume Growth: 7%
- International Rupee Revenue Growth: 3%
- International EBITDA Growth: 24%
- Constant Currency Revenue Growth: 11%
- Constant Currency EBITDA Growth: 32%
- Indonesia Organic Volume Growth: -21%
- Indonesia Organic Revenue Growth: -25%
- GAUM EBITDA Growth: 19%
- GAUM EBITDA Margins: 14%
- LatAm Revenue Salience: 21%
- LatAm Profit Salience: 12%
- Consolidated Revenue Growth: -3%
- Consolidated Constant Currency Revenue Growth: 9%
- Consolidated EBITDA Growth: 13%
- Consolidated PAT before Exceptionals: 14%
- Organic Revenue Growth: -1%
- Organic Constant Currency Revenue Growth: 11%
- Organic UVG: 2%
- Pet Foods Category Size: INR 500 crore
- Investment in Godrej PetCare: INR 500 crores over five years
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Godrej Consumer Products Ltd (BOM:532424, Financial) reported an 8% organic volume growth in India, despite a high base and challenging conditions.
- EBITDA growth in India was 8%, driven by strategic pricing actions and cost management.
- The company saw a 24% EBITDA growth in Indonesia, with a strong constant currency revenue growth of 11%.
- Godrej Consumer Products Ltd (BOM:532424) is expanding its total addressable market in India with new product launches in categories like laundry liquids and body wash.
- The formation of Godrej PetCare, a subsidiary focused on the growing pet food market, indicates strategic diversification and long-term growth potential.
Negative Points
- Indonesia experienced a significant decline in organic volumes (-21%) and organic revenue (-25%) due to currency volatility and other external factors.
- The African market faced challenges with currency appreciation and high interest rates, leading to reduced trade stocks and potential short-term volume pressure.
- The company acknowledged market share losses in urban central trade and the need to revert to a more focused distribution channel.
- Despite overall positive performance, the consolidated revenue showed a decline of 3%, indicating challenges in some segments.
- The Raymond acquisition is slightly behind profit expectations, with a potential shortfall of 15% to 20% in the targeted EBITDA.
Q & A Highlights
Highlights of Godrej Consumer Products Ltd (BOM:532424) Q1 FY25 Earnings Call
Q: What are the reasons for entering the pet food market, and how does Godrej Agrovet's experience contribute to this venture?
A: The pet food market is a large and growing category with high margins. Godrej Agrovet has expertise in animal feeds and fish feed, which share similar manufacturing technology and raw materials with pet food. This gives us a supply chain advantage. We will leverage our FMCG marketing and distribution capabilities to build this business.
Q: Can you elaborate on the changes in the Raymond business and the impact on market share and profit expectations?
A: We integrated the urban GT distribution with our existing system, which worked well in modern trade and e-commerce but not in urban GT. We are reverting to a more focused channel for urban GT. We expect to be slightly behind our profit targets for FY25 but significantly ahead of the margins we inherited.
Q: What is the status of the new liquid vaporizer (LV) launch in India, and how does it impact the market?
A: The new LV was launched on July 1st, and it will take 5-6 months to see significant sales impact. There are no issues with phasing in and out as the new LV uses the same liquid and a functionally similar machine.
Q: How is the Africa business performing, and what are the reasons for the pipeline correction?
A: Africa's EBITDA growth is driven by cost-cutting and portfolio shaping. The pipeline correction is due to currency appreciation in Nigeria and a one-time distributor base. We expect the business to recover and maintain profitability.
Q: What is the outlook for Indonesia, and how are different segments performing?
A: Indonesia grew 7% in volume on a 12% base. We aim for high single-digit volume growth and improved EBITDA margins. Growth is becoming more broad-based, with both Stella and Hit performing well.
Q: What is the innovation rate and contribution of new products in the last year?
A: We have launched several successful innovations, including instant sticks, laundry liquids, and air fresheners. These have driven significant volume growth, especially in challenging categories like household insecticides.
Q: How do you see pricing trends in India for the next three quarters?
A: We expect pricing to turn positive from this quarter onwards, contributing to low double-digit value growth for the full year.
Q: What is the margin outlook for the India business, considering the recent increase in palm oil prices?
A: Margins may face some pressure due to higher palm oil prices, but we expect to maintain overall EBITDA margins around current levels, with some improvement in volume growth.
Q: How will the pet food business be structured in terms of manufacturing and margins?
A: Godrej Agrovet will be our exclusive supplier, and we will handle sales and marketing. The pet food business is expected to have gross margins of 40-50% and EBITDA margins of 15-25% in the long term.
Q: What is the impact of geopolitical factors on the competitive landscape in Indonesia?
A: While there were reports of a soft boycott of MNC brands, it does not seem to be a significant driver of market dynamics in our categories. Our competitors are both local and international.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
