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GCPL – Q3FY11 results
Q3FY11 revenues better than expectations; EBITDA margin contract 248bps
Godrej Consumer’s (GCPL) Q3FY11 consolidated revenues jumped 89.4% to INR 9.80
bn. EBITDA increased 65.5% to INR 1.68 bn. EBITDA margins declined 248bps. COGS
inflation (up 81bps), higher other expenses (up 237bps) and Advertising and sales
promotion (A&P) costs (up 243bps) contributed to margin contraction, which was partly
offset by lower staff expenses (down 313bps). Reported PAT increased 39.6% to INR
1.19bn (vs. our expectation of INR 1.12 bn). The numbers of this quarter are, however,
not exactly comparable to previous quarters because of international acquisitions since
then.
Excellent domestic business performance
GCPL highlighted that 1). FMCG sector is expected to report healthy top line growth due
to the strong consumption demand 2). Growth is driven by mix of volume as well as
value and 3). Rising raw material prices and higher ad spend will put pressure on
margins.
GCPL continues to enjoy market leadership position in hair colours & household
Insecticides markets in India and is the second largest player in toilet soaps (~10%
market share). Market share in household insecticides increased to 37% while hair colour
market share was 29.4% in Q3FY11.
International businesses (~34% of consolidated revenues) delivered;
Despite tough economic environment, international business reported sales of INR 3.37 bn,
a growth of 296% Y-o-Y in Q3FY11. The INR growth was adversely impacted by around
4%, due to weak GBP. Integration process of international acquisitions is on-track.
3rd interim dividend of INR 1 per share; to capitalize on acquisitions of Genteel
& Swastik
Acquisition of stake of GHPL business (49% of GHPL was consolidated in Q3FY10) helped
net sales increase 49% to INR 6.45 bn. Following excellent performance in all domestic
and international businesses, board declared third interim dividend of INR 1 per share.
GCPL is working to capitalizing on the revenues and cost synergies available by the
brands Genteel and Swastik.
Outlook and valuations: Valuations attractive; maintain ‘BUY’
Looking at past successes of acquisition integration, we are confident of management’s
capabilities to derive synergy benefits. Although there would be near term pressure on
soap volumes, GCPL has maintained the market share. GCPL highlighted that the macro
economic environment is improving and it will continue to explore opportunities to
strengthen presence and competitive position in the home care, personal wash and hair
care space. We maintain ‘BUY’ recommendation on the stock, and rate it ‘Sector
Performer’ on a relative return basis
Other highlights
At consolidated level, as guided by GCPL, weightage of home care and hair care (to
group sales) has gone up and personal wash has gone down in past few quarters with full
quarter consolidation of new international business and 100% share in GHPL.
Share of Home care increased from 29% in Q1FY11 to 44% in Q3FY11, following
international acquisitions.
EBITDA margins declined 248bps. COGS inflation (up 81bps), higher other expenses (up
237bps) and Advertising and sales promotion (A&P) costs (up 243bps) contributed to
margin contraction, which was partly offset by lower staff expenses (down 313bps).
Despite palm oil prices moving up significantly in Q3FY11, gross margins declined by just
80bps Y-o-Y. Other expenses (up 237bps) were higher due to increase in sales
promotion expenses
Staff costs were lower by 313bps following lower provision of variable remuneration. Tax
rates were higher due to increase in MAT rates.
Reported PAT increased 39.6% to INR 1.19bn. The numbers of this quarter are,
however, not exactly comparable to previous quarters because of international
acquisitions since then.
Domestic business performance
GCPL highlighted that 1). FMCG sector is expected to report healthy top line growth due
to the strong consumption demand 2). Growth is driven by mix of volume as well as
value and 3). Rising raw material prices and higher ad spend will put pressure on
margins.
GCPL continues to enjoy market leadership position in hair colours & household
Insecticides markets in India and is the second largest player in toilet soaps (~10%
market share). Market share in household insecticides increased to 37% while hair colour
market share was 29.4% in Q3FY11
Q3FY11 sales increased to INR 6.45 bn while PAT increased to INR 1.05 bn. This includes
49% of GHPL in Q3FY10 vs. 100% of GHPL in Q3FY11 and excludes dividend income of
INR 102 mn received by GCPL from GHPL.
As guided by GC PL, weightage of home care has gone up and personal wash has
gone down in past quarters with full quarter consolidation of 100% share in GHPL.
Soaps: Sales grew by 6% Y-o-Y in Q3FY11, with market share of 10.0% in Q3 2010-11.
Strong media presence on
– ‘Pen free’ consumer offer on relaunched Godrej No.1
– ‘Buy 2 Get 1 Free’ consumer offer on Cinthol Lime fresh
GCPL relaunched Fairglow soap as specialist fairness soap in new shape and packaging
Hair Colours: Strong sales growth of 9% Y-o-Y in Q3FY11, with market share at 29.4%
behind many successful marketing initiatives.
– Strong presence in media and press of Godrej Expert
– Cinema campaign in South India on Godrej Expert
Household Insecticides (HI): HIT Aerosols have grown at healthy rates on back of 360 °
activation drive awareness for ‘Kill Malaria’ campaign.
Under Goodknight franchise coils, electrics and naturals cream continue to outperform
category on the back of innovative products and successful marketing initiatives share.
The acquisition of Genteel & Swastik
The acquisition of Genteel extends leadership in the specialty liquid detergents category.
The acquisition of Swastik consolidates number two position in the personal wash
category in India
Genteel and Swastik are household brands in India with a legacy of over
fifty years of serving Indian consumers
GCPL is working to capitalizing on the revenues and cost synergies available by adding
these heritage brands to the portfolio and helping take these brands to their next phase
of growth.
International businesses (~34% of consolidated revenues) delivered
Despite tough economic environment, international business reported sales of INR 3.37
bn, a growth of 296% Y-o-Y in Q3FY11. The INR growth was adversely impacted by
around 4%, due to weak GBP. Integration process of international acquisitions is ontrack.
International business achieved a PBT of INR 160 mn. PBT excluding one time expenses
stood at INR 220 mn. International businesses now account for ~34% of consolidated
sales.
Asia (excluding India)
Megasari: Acquisition was completed on 17th May, 2010. Megasari continues to enjoy its
number two position in household insecticides markets and leadership positions in air care
and wipes markets in Indonesia. Megasari registered strong growths in household insecticides
category despite week mosquito season due to continuous rains, on back of distribution
expansion and NPDs. Sales were at INR 1.85 bn while EBITDA was at INR 270 mn. EBITDA
margins were at 19% before payment of technical fees to GCPL.
Middle East business registered sales of INR 40 mn.
Africa (Rapidol, Kinky and Tura)
Tura acquisition was completed on 16th June, 2010. Rapidol continues to enjoy its market
leadership position in the ethnic hair colour market in South Africa. Sales growths were
affected by slowing economy and local competition. Sales were at INR 530 mn while EBITDA
was at INR 50 mn. EBIDTA includes one time expense on stocks write-off of INR 30 mn.
Latin America (Issue and Argencos businesses)
GCPL completed acquisition of 100% stake in Laboratoria Cuenca, Consell SA, Issue Uruguay
and Issue Brazil (collectively referred to as ‘Issue Group’) on 2nd June 2010. Issue brand
enjoys volume leadership in Argentina with 20% market share.
GCPL completed acquisition of 100% stake in Argencos, a mid-sized Argentine hair care
company on 8nd July 2010. Argencos has a strong portfolio of brands in the hair care space.
Roby enjoys market leadership in hair styling sprays while ‘919’ occupies the mid-premium
space.
During Q3FY11, Issue and Argencos businesses merged operationally, led by CEO of Issue for
combined business. Merger will realize significant purchase and distribution synergies; being
the largest volume player in Argentina. Encouraging sales growth was witnessed in new Roby
Glam & Gloss product – the first anti-frizz hair spray in an aerosol format. GCPL is focusing
on investing in growing our presence in Latin American markets in the region to have a
significant share of sales to come from outside Argentina going forward. Argencos CEO is
leading the venture to develop international markets in his new role at Godrej Argentina.
Sales were at INR 630 mn while EBITDA was at INR 60 mn.
UK
Keyline’s revenues stood at INR 300 mn and EBDITA at INR 10 mn (excluding one time
expense on warehouse transition related dilapidation and leasehold write/off of INR 30 mn)
Warehouse transition is expected to yield savings from FY 12.
The INR growth was adversely impacted by around 4%, due to weak GBP.
Sales (ex. cuticura, which had a high base effect due to H1N1 last year) recorded positive
growth.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
GCPL – Q3FY11 results
Q3FY11 revenues better than expectations; EBITDA margin contract 248bps
Godrej Consumer’s (GCPL) Q3FY11 consolidated revenues jumped 89.4% to INR 9.80
bn. EBITDA increased 65.5% to INR 1.68 bn. EBITDA margins declined 248bps. COGS
inflation (up 81bps), higher other expenses (up 237bps) and Advertising and sales
promotion (A&P) costs (up 243bps) contributed to margin contraction, which was partly
offset by lower staff expenses (down 313bps). Reported PAT increased 39.6% to INR
1.19bn (vs. our expectation of INR 1.12 bn). The numbers of this quarter are, however,
not exactly comparable to previous quarters because of international acquisitions since
then.
Excellent domestic business performance
GCPL highlighted that 1). FMCG sector is expected to report healthy top line growth due
to the strong consumption demand 2). Growth is driven by mix of volume as well as
value and 3). Rising raw material prices and higher ad spend will put pressure on
margins.
GCPL continues to enjoy market leadership position in hair colours & household
Insecticides markets in India and is the second largest player in toilet soaps (~10%
market share). Market share in household insecticides increased to 37% while hair colour
market share was 29.4% in Q3FY11.
International businesses (~34% of consolidated revenues) delivered;
Despite tough economic environment, international business reported sales of INR 3.37 bn,
a growth of 296% Y-o-Y in Q3FY11. The INR growth was adversely impacted by around
4%, due to weak GBP. Integration process of international acquisitions is on-track.
3rd interim dividend of INR 1 per share; to capitalize on acquisitions of Genteel
& Swastik
Acquisition of stake of GHPL business (49% of GHPL was consolidated in Q3FY10) helped
net sales increase 49% to INR 6.45 bn. Following excellent performance in all domestic
and international businesses, board declared third interim dividend of INR 1 per share.
GCPL is working to capitalizing on the revenues and cost synergies available by the
brands Genteel and Swastik.
Outlook and valuations: Valuations attractive; maintain ‘BUY’
Looking at past successes of acquisition integration, we are confident of management’s
capabilities to derive synergy benefits. Although there would be near term pressure on
soap volumes, GCPL has maintained the market share. GCPL highlighted that the macro
economic environment is improving and it will continue to explore opportunities to
strengthen presence and competitive position in the home care, personal wash and hair
care space. We maintain ‘BUY’ recommendation on the stock, and rate it ‘Sector
Performer’ on a relative return basis
Other highlights
At consolidated level, as guided by GCPL, weightage of home care and hair care (to
group sales) has gone up and personal wash has gone down in past few quarters with full
quarter consolidation of new international business and 100% share in GHPL.
Share of Home care increased from 29% in Q1FY11 to 44% in Q3FY11, following
international acquisitions.
EBITDA margins declined 248bps. COGS inflation (up 81bps), higher other expenses (up
237bps) and Advertising and sales promotion (A&P) costs (up 243bps) contributed to
margin contraction, which was partly offset by lower staff expenses (down 313bps).
Despite palm oil prices moving up significantly in Q3FY11, gross margins declined by just
80bps Y-o-Y. Other expenses (up 237bps) were higher due to increase in sales
promotion expenses
Staff costs were lower by 313bps following lower provision of variable remuneration. Tax
rates were higher due to increase in MAT rates.
Reported PAT increased 39.6% to INR 1.19bn. The numbers of this quarter are,
however, not exactly comparable to previous quarters because of international
acquisitions since then.
Domestic business performance
GCPL highlighted that 1). FMCG sector is expected to report healthy top line growth due
to the strong consumption demand 2). Growth is driven by mix of volume as well as
value and 3). Rising raw material prices and higher ad spend will put pressure on
margins.
GCPL continues to enjoy market leadership position in hair colours & household
Insecticides markets in India and is the second largest player in toilet soaps (~10%
market share). Market share in household insecticides increased to 37% while hair colour
market share was 29.4% in Q3FY11
Q3FY11 sales increased to INR 6.45 bn while PAT increased to INR 1.05 bn. This includes
49% of GHPL in Q3FY10 vs. 100% of GHPL in Q3FY11 and excludes dividend income of
INR 102 mn received by GCPL from GHPL.
As guided by GC PL, weightage of home care has gone up and personal wash has
gone down in past quarters with full quarter consolidation of 100% share in GHPL.
Strong media presence on
– ‘Pen free’ consumer offer on relaunched Godrej No.1
– ‘Buy 2 Get 1 Free’ consumer offer on Cinthol Lime fresh
GCPL relaunched Fairglow soap as specialist fairness soap in new shape and packaging
Hair Colours: Strong sales growth of 9% Y-o-Y in Q3FY11, with market share at 29.4%
behind many successful marketing initiatives.
– Strong presence in media and press of Godrej Expert
– Cinema campaign in South India on Godrej Expert
Household Insecticides (HI): HIT Aerosols have grown at healthy rates on back of 360 °
activation drive awareness for ‘Kill Malaria’ campaign.
Under Goodknight franchise coils, electrics and naturals cream continue to outperform
category on the back of innovative products and successful marketing initiatives share.
The acquisition of Genteel & Swastik
The acquisition of Genteel extends leadership in the specialty liquid detergents category.
The acquisition of Swastik consolidates number two position in the personal wash
category in India
Genteel and Swastik are household brands in India with a legacy of over
fifty years of serving Indian consumers
GCPL is working to capitalizing on the revenues and cost synergies available by adding
these heritage brands to the portfolio and helping take these brands to their next phase
of growth.
International businesses (~34% of consolidated revenues) delivered
Despite tough economic environment, international business reported sales of INR 3.37
bn, a growth of 296% Y-o-Y in Q3FY11. The INR growth was adversely impacted by
around 4%, due to weak GBP. Integration process of international acquisitions is ontrack.
International business achieved a PBT of INR 160 mn. PBT excluding one time expenses
stood at INR 220 mn. International businesses now account for ~34% of consolidated
sales.
Asia (excluding India)
Megasari: Acquisition was completed on 17th May, 2010. Megasari continues to enjoy its
number two position in household insecticides markets and leadership positions in air care
and wipes markets in Indonesia. Megasari registered strong growths in household insecticides
category despite week mosquito season due to continuous rains, on back of distribution
expansion and NPDs. Sales were at INR 1.85 bn while EBITDA was at INR 270 mn. EBITDA
margins were at 19% before payment of technical fees to GCPL.
Middle East business registered sales of INR 40 mn.
Africa (Rapidol, Kinky and Tura)
Tura acquisition was completed on 16th June, 2010. Rapidol continues to enjoy its market
leadership position in the ethnic hair colour market in South Africa. Sales growths were
affected by slowing economy and local competition. Sales were at INR 530 mn while EBITDA
was at INR 50 mn. EBIDTA includes one time expense on stocks write-off of INR 30 mn.
Latin America (Issue and Argencos businesses)
GCPL completed acquisition of 100% stake in Laboratoria Cuenca, Consell SA, Issue Uruguay
and Issue Brazil (collectively referred to as ‘Issue Group’) on 2nd June 2010. Issue brand
enjoys volume leadership in Argentina with 20% market share.
GCPL completed acquisition of 100% stake in Argencos, a mid-sized Argentine hair care
company on 8nd July 2010. Argencos has a strong portfolio of brands in the hair care space.
Roby enjoys market leadership in hair styling sprays while ‘919’ occupies the mid-premium
space.
During Q3FY11, Issue and Argencos businesses merged operationally, led by CEO of Issue for
combined business. Merger will realize significant purchase and distribution synergies; being
the largest volume player in Argentina. Encouraging sales growth was witnessed in new Roby
Glam & Gloss product – the first anti-frizz hair spray in an aerosol format. GCPL is focusing
on investing in growing our presence in Latin American markets in the region to have a
significant share of sales to come from outside Argentina going forward. Argencos CEO is
leading the venture to develop international markets in his new role at Godrej Argentina.
Sales were at INR 630 mn while EBITDA was at INR 60 mn.
UK
Keyline’s revenues stood at INR 300 mn and EBDITA at INR 10 mn (excluding one time
expense on warehouse transition related dilapidation and leasehold write/off of INR 30 mn)
Warehouse transition is expected to yield savings from FY 12.
The INR growth was adversely impacted by around 4%, due to weak GBP.
Sales (ex. cuticura, which had a high base effect due to H1N1 last year) recorded positive
growth.
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