Godrej Consumer products shares took a nose dive after company released a Q3 business update in the middle of the quarter which declared weak demand headwinds suggesting lower margins in Q3.
The share nosedived almost 11 per cent on NSE (National Stock Exchange), plunging to day low level of Rs 1101.65 per share on the exchanges after hitting the opening bell at Rs 1,169.95 per share with 5.87 per cent in negative territory.
Godrej Consumer Products stock were trading at Rs 1,109.50 per share on the Indian bourses with 10.19 per cent decline amounting to Rs 125.95 per share on the NSE (National Stock Exchange).
Mute market growth in past months
The growth of the FMCG market indicates that demand in India has been muted for the past few months. Godrej Consumer Products stated in its mid-Q3 business update that “GCPL has continuously delivered an average organic UVG of ~7 per cent over the past six quarters on the back of category development supported by innovations and media investments,” despite the demand conditions.
Soaps business saw big impact
Soaps, which account for one-third of Godrej Consumer Products’ standalone business revenue, have been impacted by the 20 per cent to 30 per cent YoY increase in palm oil and derivatives prices.
The company stated that it has raised prices, decreased the grammage of key packs, and scaled back a number of trade schemes in order to partially offset the cost increases.
Lower inventory in household
‘Such pricing actions generally result in lower inventory across wholesale and household pantry, but they have little effect on category consumption.’ Following price stabilization, historical trends show that volume growth normalizes, which is what the company expects to happen in the coming months.
Additionally, the business noted that the growth of its Home Insecticides segment, which accounts for one-third of its standalone business, has been hampered by unfavorable weather conditions.
