Godrej Consumer Products, FMCG market, the company has reported a strong growth in pay and consolidated revenues in the fourth quarter ended March 2010.
Although the results were not completely comparable with the same quarter last year due to the consolidation of Godrej Sara Lee company, they are much in line with market expectations. But the consolidated results do not present the whole image.
A look at the results of its operations which contribute about 80% of the turnover, shows a great dissatisfaction.
The company has reported a near flat growth of 2% in standalone net sales on the back of weak growth in the volume in his weight class products such as soap and hair color. This is despite the company considerably increase its publicity spending from 4% of net sales - in the same period last year - to 10% today.
Good commodity prices may have helped the company register a growth of 14% of its stand-alone earnings and improve operating margins by 470 bps.
The ever-declining growth in weight class customer goods are bad news for us - a sign of slowdown in consumer demand. Rising food prices, inflation has begun to hurt the consumer's budget and spending.
continuance of this phenomenon can not bode well for GCPL bearing in mind taking price increases on its products in hair care and soaps segment. If consumer demand continues to shrink, the company may be able to take their planned price increases over the next few months.
Street became aware of same and reacted negatively to the company's results message. GCPL inventory adjusted after the results were announced, and closed the trading session with a fall of 2.6%. Although this can be careful a small decline for the stock has accumulated very sharply in recent months, signals the continued weakening of the market feelings for the company's prediction.
The company's consolidated results is expected to be strong in coming quarters as the newly acquired foreign entities in Nigeria and Indonesia have reflected in their results.
They will continue to be without equal with the corresponding quarter in the previous fiscal year.Investors need to closely monitor the company's individual presentation. A flat growth or a decline in earnings growth in coming quarters is not good for the company.
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