Godrej Consumer Products shares sink 5% as Q3 sees low-single digit sales decline

Godrej Consumer Products projected that it will deliver mid-single digit volume growth in Q3FY24.

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Godrej Consumer Products shares fell five percent in early trade on January 8, as the FMCG major said that the company would see a low-single-digit sales decline in rupee terms at a consolidated level, for the quarter ended December 31.

The domestic operating environment for FMCG companies has remained similar to the previous quarter, with low rural offtake, despite which, Godrej will deliver steady underlying volume growth in the mid-single digits.

“Growth was broad-based across both Home Care and Personal Care. Park Avenue and KamaSutra brands continue to perform well and are on track to achieve full-year ambition,” said GCPL in a filing with the bourses.

As of 9.20am, Godrej Consumer Products stock was trading at Rs 1,166.70, lower by 4.36 percent compared to the closing price of the previous session.

Godrej Consumer Products projected that it will deliver mid-single-digit volume growth and double-digit constant currency sales growth but low-single-digit sales decline in INR terms due to GAUM and LATAM currency and hyperinflation accounting impact.

The reported sales growth will likely be flat in INR terms. “We continue to drive year-on-year expansion in EBITDA (incl. Forex) margin despite significantly higher category development investments,” said the company.

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The LATAM business revenue has been severely impacted on account of the sharp devaluation in Argentinian Peso from 361 to 808. As a result, due to hyperinflation, this has impacted nine months of revenue.

The hyperinflation is likely to have a negative impact of the mid-single digit on consolidated sales. However, the impact on profit is minimal. Despite the challenging environment, the LATAM business continues to deliver positive volume growth, according to the company.

CLSA and Morgan Stanley had differing views on the consumer goods company. While CLSA maintained its ‘sell’ call, with a target price of Rs 936 apiece, Morgan Stanley retained its ‘overweight’ call, with a price target of Rs 1,072 per share.

CLSA noted that the domestic volumes were in line with expectations, and organic sales growth saw a decline due to the currency fluctuation.

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