Godrej Consumer Products Ltd (CRD) - aceanalyser.com Meet/132424_20131114.pdf · Godrej Consumer...

1 I GCPL I Performance Update Q2 FY14 I Nov 11, 2013

GODREJ CONSUMER PRODUCTS LIMITED

Q2 FY 2014 – PERFORMANCE UPDATE

November 11, 2013

EXECUTIVE SUMMARY : MAJOR HIGHLIGHTS

PERFORMANCE HIGHLIGHTS : CONSOLIDATED

BUSINESS OVERVIEW : INDIA

BUSINESS OVERVIEW : INTERNATIONAL

PERFORMANCE UPDATE

OVERALL PERFORMANCE

Strong sales growth coupled with improved profit growth

Q2 FY 2014

Growth (%) Consolidated India International

Sales 23% 14%

(branded business - 17%)

33%

Organic Constant

Currency Sales

14% 14% 14%

EBITDA 20%

(ex Indonesia’s food

distribution - 23%)

20% 21%

H1 FY 2014

Growth (%) Consolidated India International

Sales 23% 16%

(branded business - 19%)

32%

Organic Constant

Currency Sales

16% 16% 16%

EBITDA 16%

(ex Indonesia’s food

distribution - 19%)

18% 15%





PERFORMANCE UPDATE


ROBUST GROWTH IN BOTH SALES AND PROFITS

159

195

Q2 FY13 Q2 FY14

Net Profit

249

300

Q2 FY13 Q2 FY14

EBITDA

1,598

1,957

Q2 FY13 Q2 FY14

Net Sales

All values INR cr

∆23%

∆ 20% ∆ 22%

EBITDA + A&P grows +28%

ADVERSE FOREX IMPACT DUE TO DEVALUATION OF

CURRENCIES

India

• As on September 30, 2013 the net payables stood at US$ 3.2 million. Net Forex loss

for the quarter is INR 4.1 crore

Consolidated

• GCPL has adopted the notification issued by the ministry of corporate affairs on

December 29, 2011 on amortization of forex impacts

• The total Net Forex loss for the quarter, including mark to market impact at

consolidated level aggregates to INR 6.3 crore

RIGOROUS FOCUS ON WORKING CAPITAL

IMPROVEMENTS

NET WORKING CAPITAL (EX CASH) IN DAYS OF

SALES

NET DEBT TO EQUITY RATIO

26.0

19.7

Mar'13 Sep'13

0.48

0.47

Mar'13 Sep'13

HOLDING STRUCTURE RATIONALIZED DURING THE

QUARTER

In order to simplify and streamline the holding structure of our businesses, we have made

the following changes to our structure:

Godrej Hygiene Products Limited (GHPL), a 100% subsidiary has been merged with

Godrej Consumer Products Limited vide scheme of amalgamation sanctioned by Hon’ble

High Court of Bombay. The assets and liabilities of the erstwhile GHPL have been taken

over at book value.

Two of the intermediate holding entities in the Netherlands that hold the Indonesia

business have been merged vide scheme of amalgamation sanctioned by a Dutch court.

The resultant revaluation of assets and liabilities amounting to about INR 38 crore has

been adjusted in the reserves. Had this merger not taken effect during the period under

consideration, the revaluation would have reflected in the P&L under the foreign

exchange gain (loss) line item.





PERFORMANCE UPDATE


STRONG SALES GROWTH CONTINUES IN INDIA

BUSINESS

127

143

Q2 FY13 Q2 FY14

Net Profit

161

194

Q2 FY13 Q2 FY14

EBITDA

896

1,024

Q2 FY13 Q2 FY14

Net Sales

All values in INR crore

∆ 14%

∆ 20% ∆ 13%

EBITDA + A&P grows +26%

India branded sales growth at 17% (against

reported growth of 14%), after taking into

account discontinuation of third party contract

manufacturing sales, which is in the base

WE CONTINUE TO INVEST BEHIND OUR NEW

LAUNCHES THAT ARE GAINING STRONG TRACTION

BRANDED SALES GROWTH BREAKUP – H1 FY 2014 A&P GROWTH BREAKUP – H1 FY 2014

14%

57%

43%

Base NPD Overall

37% of incremental growth from new launches

12%

19%

7%

Base NPD Overall

WE LAUNCHED GOOD KNIGHT FAST CARD –

A REVOLUTIONARY NEW PRODUCT THIS QUARTER

a non-electrical format, and is easy to use, using it is

as simple as - ‘Fold’, ‘Fire’, and ‘Foo’

starts working immediately - ‘3 min instant action’

provides 4 hours of protection

has ‘TFT’ - one of the safest active molecules

after 3 minutes there is no-smoke, no fire

breaking the price barrier, INR 1/- per card

HOUSEHOLD INSECTICIDES MAINTAINS ROBUST

GROWTH TRAJECTORY

• Value growth at 25%, well ahead of the category

• Both the key brands HIT and Good knight continue to gain share and maintain market

leadership position across all the three formats

• HIT Anti Roach Gel continues to do well

WE LAUNCHED AN INNOVATIVE ‘KILL PESTS KILL

DISEASES’ CAMPAIGN

SOAPS CATEGORY FACED A CHALLENGING QUARTER

• Value growth at 3%; Volume growth at 4%, ahead of reported category growth

• Sales growth lower than expectations due to relatively slower ramp for one of our

key consumer offers and political turmoil in Andhra Pradesh

• Godrej No 1 Saffron & Milk Cream variant selected as a Nielsen Breakthrough

Innovation

HAIR COLOURS CONTINUES EXCELLENT MOMENTUM

• Strong 24% value growth led by Godrej Expert Rich Hair Crème and Godrej

Expert Advanced Hair Colour, well ahead of the category

• Launched Godrej Expert Rich Hair Crème in South India

• Salon engagement programme initiated to drive crème penetration in small towns

and villages

AIR FRESHENERS CONTINUE TO SCALE UP WELL

• New format introduced to provide consistent

fragrance in a spill proof gel technology

• Launch of twin pack (2 refills and 1 click machine)

for car accessories market

• Innovative marketing campaign on twitter leading to

first ever twitter sourced song ‘Don’t Smoke

Because’ campaign (http://goo.gl/kqITmU)

http://goo.gl/kqITmU










PERFORMANCE UPDATE

GROWTH MOMENTUM MAINTAINED DESPITE

CHALLENGING MACRO ENVIRONMENT

• 14% organic constant currency growth

• 11.3% EBITDA margins (down by 110 bps y/y) driven by foods business distribution

(60 bps impact) and lag in price hikes for 33% fuel price hike and 58% wage price

hike (70 bps impact) in Indonesia

707

941

Q2 FY13 Q2 FY14

Net Sales

∆ 33% 87

106

Q2 FY13 Q2 FY14

EBITDA

∆ 21 %

STRONG SALES GROWTH ACROSS KEY GEOGRAPHIES

Constant currency includes inorganic growth

All values in INR crore

Net Sales Growth (%)

Constant currency + 13 + 53 + 23 + 88

Exchange + 1 0 (4) + 14

YOY Reported + 14 + 53 +19 + 102

361

250

154 138

Indonesia Africa Latin America Europe

MARGINS HAVE IMPROVED SEQUENTIALLY

* Before payment of technical & business support fee and non food business

(170) bps + 390 bps + 60 bps YoY change (160) bps

17%

14%

7%

10%

Indonesia * Africa Latin America Europe

15% 13% 3% 9% Q1 FY14

INDONESIAN BUSINESS MAINTAINS GOOD

TRAJECTORY

• Sales growth excluding foods distribution of 17% led by

• Continued marketing investments

• New product launches

• Distribution expansion

• HIT continues to gain market share

• Stella is also strengthening market position aided by new

product launches

MARGINS IN THE INDONESIA BUSINESS HAVE BEEN

ADVERSELY IMPACTED IN THE NEAR-TERM

• Distribution arrangement (for one year) for divested foods business at break even

margins

- As a result, while sales from that business is recorded as earlier, EBITDA

contribution is zero leading to lower margins

- Impact on EBITDA margins by ~140 bps

• Minimum wage increase of 58% and fuel price increase of 33% creating pressure on

margins. Calibrated price increases have been taken to absorb these cost increases

- Margins have improved 150 bps sequentially

- We expect margins to normalize gradually

AFRICA BUSINESS CONTINUES TO SCALE UP AS PER PLAN

• Business presence in South Africa, Mozambique, Nigeria

and Kenya across hair extensions, hair colours, household

insecticides and personal wash

• Business momentum impacted due to lower consumer

confidence in South Africa. Worsening macro environment -

sales de-growth in key retail chains, auto workers strike, and

consumer spending at 10 year low

• Recently launched wet hair care products portfolio in Kenya

and household insecticides launch in Nigeria progressing

well

• Godrej South Africa (Rapidol and Kinky) certified as a ‘Top

Employer 2014’ in South Africa

LATAM BUSINESS DELIVERS GOOD QUARTER

• Sales growth led by continued marketing investments and

new product launches

• Margins improved on a y/y basis. Projects underway to

further improve margin profile of the business.

• In Argentina, Issue and 919 continue to strengthen market

share in hair colors

• In Chile, Pamela Grant re-launched with improved

packaging and a new brand ambassador

• New Issue 3D Gloss marketing campaign launched in Peru,

Bolivia and Paraguay

EUROPE BUSINESS DELIVERS STRONG

PERFORMANCE

• Healthy growth rates supported by good

performance of organic business as well as Soft &

Gentle acquisition

• Strong gross margin expansion supported higher

investments in brands

• Active media and trade investments in Soft &

Gentle brand to boost the brand’s equity

• Touch of Silver range registers excellent growth

doubling market share on a y/y basis

Q2 FY 2014 PERFORMANCE SNAPSHOT

India International Consolidated

In ` Cr Q2FY14 Q2FY13 Y/Y Q2FY14 Q2FY13 Y/Y Q2FY14 Q2FY13 Y/Y

Sales 1,024 896 14% 941 707 33% 1,957 1,598 23%

Gross Profit 535 419 28% 517 391 32% 1,052 810 30%

Gross Margin(%) 52.3% 46.8% 546 54.9% 55.2% (35) 53.7% 50.7% 303

EBITDA 194 161 20% 106 87 21% 300 249 20%

EBITDA

Margin(%) 18.9% 18.0% 94 11.3% 12.4% (108) 15.3% 15.6% (27)

EBITDA+A&P 303 240 26% 218 168 29% 520 408 28%

EBITDA+A&P(%) 29.6% 26.7% 283 23.1% 23.7% (63) 26.6% 25.5% 107

Net Profit 143 127 13% 52 33 60% 195 159 22%

Net Profit

Margin(%) 13.9% 14.1% (21) 5.6% 4.6% 95 10.0% 10.0% (1)

Y/Y change in margins is in bps

STOCKHOLDING PATTERN

As on September 30, 2013

MAJOR FIIs

Promoter, 63%

FII, 30%

DII, 1% Retail, 5%

Aberdeen

Temasek

Arisaig National

Westminster Bank

ADIA

First State

Vanguard

Blackrock

GIC

Invesco UBS

Others

WE REMAIN LASER FOCUSED ON EXECUTING OUR

KEY PRIORITIES

• Extending leadership in our core categories

• Capitalizing on international growth potential

• Accelerating renovation and innovation

• Building a future ready sales system

• Making our supply chain best in class

• Building an agile and high performance culture

CONTACT US

P GANESH

CFO

Email: [email protected]

Tel: +91 22 2519 4313

SAMEER SHAH

Finance & Investor Relations

Email: [email protected]

Tel: +91 22 2519 4467

for more details please visit http://www.godrejcp.com

http://www.godrejcp.com

DISCLAIMER

This release / communication, except for the historical information, may contain statements, including the words or phrases such as ‘expects, anticipates, intends, will, would, undertakes, aims, estimates, contemplates, seeks to, objective, goal, projects, should’ and similar expressions or variations of these expressions or negatives of these terms indicating future performance or results, financial or otherwise, which are forward looking statements. These forward looking statements are based on certain expectations, assumptions, anticipated developments and other factors which are not limited to risk and uncertainties regarding fluctuations in earnings, market growth, intense competition and the pricing environment in the market, consumption level, ability to maintain and manage key customer relationship and supply chain sources and those factors which may affect our ability to implement business strategies successfully, namely changes in regulatory environments in India and overseas, political instability, change in international oil prices and input costs and new or changed priorities of the trade. The Company, therefore, cannot guarantee that the forward looking statements made herein shall be realized. The Company, based on changes as stated above, may alter, amend, modify or make necessary corrective changes in any manner to any such forward looking statement contained herein or make written or oral forward looking statements as may be required from time to time on the basis of subsequent developments and events. The Company does not undertake any obligation to update forward looking statements that may be made from time to time by or on behalf of the Company to reflect the events or circumstances after the date hereof.

THANK YOU FOR YOUR TIME AND CONSIDERATION

Press Release – November 14, 2013

PRESS RELEASE

Q2 FY 2014 RESULTS

Mumbai, November 11, 2013: Godrej Consumer Products Limited (GCPL), a leading FMCG company, today announced its financial results for the quarter ended September 30, 2013. FINANCIAL OVERVIEW Strong sales growth coupled with improved profit growth Q2 FY 2014 Consolidated Net Sales increased by 23% to INR 1,957 crore - India branded business grows 17% with ahead of the market growth across core

categories

- International business grows 33%

Q2 FY 2014 Consolidated EBITDA increased by 20% to INR 300 crore

- Consolidated EBITDA excluding foods distribution business in Indonesia grows 23%

- India business EBITDA grows 20% driven by strong expansion in gross margins

- International business EBITDA grows 21%

Q2 FY 2014 Consolidated Net Profit After Minority Interest increased by 22% to INR 195 crore

Q2 FY 2014 Second Interim Dividend of 100% (INR 1 per share)


CHAIRMAN’S COMMENTS Commenting on the financial performance of Q2 FY 2014, Mr. Adi Godrej, Chairman, Godrej Group, said: “In a challenging environment, we have delivered 23% growth well ahead of FMCG industry growth. Along with healthy top line growth, we have also delivered good operating profit growth with 20% EBITDA growth. Our robust operating performance is a result of our continued focus on strengthening our position in our core categories. We continue to be aggressive in launching new innovations that have been well accepted by our consumers. We are backing our new launches with strong investments. At the same time, we continue to intensify our efforts in enhancing our distribution and improving productivity through technology. The overall market outlook remains turbulent and uncertain. We remain watchful, agile and prudent. We have launched several operational excellence initiatives to further enhance our operational performance. Uncertainties however also present opportunities to propel forward. We will continue investing judiciously for the longer term to improve our position, create competitive advantage and emerge stronger than ever before. I am confident that with our clear strategic focus, our superior execution and our top notch team, we will continue to deliver industry leading results in the future.”


BUSINESS REVIEW – INDIA BUSINESS Performance Highlights - Q2 FY 2014 Net Sales increased by 14% INR 1,024 crore - Q2 FY 2014 Branded Sales Growth increased by 17% - Q2 FY 2014 EBITDA increased by 20% to INR 194 crore - Q2 FY 2014 Net Profit increased by 13% to INR 143 crore

Category Review Household Insecticides: Sales growth at +25%; again well ahead of the category. Both our key brands Hit and Good knight continue to gain share and strengthen market leadership positions across all formats. Continuing with our strong innovation track record in the category, we introduced a paper based mosquito repellant Good knight Fast Card at a price point of INR 1. Our other innovation, HIT Anti Roach Gel is also gaining momentum, delivering ahead of expectations. Soaps: Sales growth at +3%; volume growth at +4%, ahead of the category growth. Sales growth was lower than expectations due to relatively slower ramp up of a key consumer offer and political turmoil in Andhra Pradesh. Godrej No. 1 Saffron & Milk cream was selected as a Nielsen breakthrough innovation. Hair Colours: Strong momentum in hair colours was maintained, delivering sales growth at +24%, ahead of the category growth. We launched Godrej Expert Rich Hair Crème in South India. We also initiated salon engagement programmes to drive Crème penetration in small towns and villages.


BUSINESS REVIEW – INTERNATIONAL BUSINESSES Indonesia: Megasari in Indonesia registered good sales growth of +14%, with sales at INR 361 crore, led by continued marketing investments, new product launches and distribution expansion. Business continues to gain market share across categories. Sales growth excluding the foods distribution business was 17%. EBITDA margin was at 17% (before payment of technical and business support fee and excluding impact of distribution for Indonesia’s food business). Africa: Business presence in South Africa, Mozambique, Nigeria and Kenya across hair extensions, hair colours, household insecticides and personal wash category. Sales stood at INR 250 crore and EBITDA margin at 14%. Macro environment in South Africa remains challenging. Darling integration is proceeding well as per plan. Latin America: Sales stood at INR 154 crore with EBITDA margin at 7%. Sales growth was led by continued marketing investments and new product launches. Business strengthened market share across categories.


Europe: Sales stood at INR 138 crore, on the back of innovation and brand investments. Sales growth was aided by very strong organic growth and Soft & Gentle brand integration. EBITDA margin at 10%. The figures for the current quarter are not comparable with those of the corresponding quarter of the previous year because of the acquisitions made since then.


ABOUT GCPL Godrej Consumer Products Limited (GCPL) is a major player in the Indian FMCG market, with leading Household and Personal Care Products. Our brands, which include Good knight, Cinthol, Godrej No. 1, Expert, Nupur, aer, Hit, Fairglow, and Ezee are household names across the country. We are one of the largest marketers of toilet soaps in the country and are also leaders in hair colours and household insecticides. Four of our brands (Good knight, Cinthol, Godrej No.1 and Godrej Expert Powder Hair Colour) are ranked among the ‘100 Most Trusted Brands’ in the country by Economic Times - Brand Equity 2012. We are driven by our mission to continuously enhance the quality of life of consumers in high-growth markets with superior-quality and affordable home care, personal care and hygiene products. We also have a strong emerging presence in markets outside India. As part of increasing our global footprint, we acquired 60% rights in Cosmetica Nacional, a Chilean hair colour company. The acquisition of the pan-African Darling Group, and Rapidol and Kinky in South Africa have given GCPL leading positions in the fast growing African ethnic hair care market. With acquisitions in West Africa, the Megasari Group, a leading household care company in Indonesia and Issue Group and Argencos, two leading hair colorant companies in Argentina, Godrej UK, and Godrej Global Mideast FZE, we own international brands and trademarks in Asia (excluding India), Latin America, Africa, Europe and the Middle East.


For further information, please contact: P Ganesh Email: [email protected] Tel: +91 22 2519 4313

Sameer Shah Email: [email protected] Tel: +91 22 2519 4467

Disclaimer: Some of the statements in this communication may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially from those expressed or implied. Important developments that could affect the Company’s operations include changes in the industry structure, significant changes in political and economic environment in India and overseas, tax laws, import duties, litigation and labour relations.

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