Conference Call      
          Godrej Consumer Products
Soap has grown by 32% in value and 19% in volume, way ahead of category


Godrej Consumer Products (GCPL) held a Conference Call to discuss the quarter ended September 2011 result. Mr. Adi Godrej, Chairman of the company addressed the meet. Following are the key highlights of the meet:

Highlights of the meet
The consolidated net sales for Q2 FY12 increased by 23% at Rs 1191.89 crore. The domestic business grew by 24% with healthy growth across the categories of soaps, household insecticide and hair colours. Home care business grew by 29%, personal wash (soaps) by 32% and hair care business 15%. OPM inclined by 17 bps to 18%. There was a forex loss of Rs 16.57 crore. The net profit was down by 3% to Rs 127.71 crore
Soap sales growth way ahead of the category growth rate of around 10%. Soap business volume grew by 19%, while category has shown negative growth of 2%.
The management said that soap growth is sustainable. Also, there was a sequential expansion of gross margins led by full impact of price increase and marginal decline in palm oil prices. However, soap prices are expected to go up, as vegetable oil prices are still high and margin are still low.
International business grew by 24% to Rs 419 crore, growth was driven by Indonesia and Latin America. The organic growth for international business was 19% and 17% without currency fluctuation. International business accounts for 35% of consolidated revenue. EBIDTA increased by 72% to Rs 66 crore. Net profit was at Rs 19 crore.
Sales of Indonesia business or Megasari which accounts for 55% of international business grew by 27% to Rs 230 crore on back of distribution expansion and new products. The local currency growth for Indonesia business is 20%. OPM margin expanded by 180 bps to 19.4% before payment of technical & business support fee. The margin expanded by 200 bps on Q-o-Q basis led by favorable category sales mix change, new products performance and prudent cost management.
Africa's business (Rapidol, Kinky and Tura) contributes 15% of international business revenue, had shown sales growth of 47% to Rs 65 crore and with margin of 26%..
Rapidaol grew by 28%. The maximum benefits of integration would be derived between the Kinky and Darling businesses in South Africa, reflecting in Kinky margins from Q4FY12.
Sales of Latin America contributes around 16% of international business revenue, had shown a sales growth of 13% to Rs 66 crore and had a margin of 7.4%, growth of 100 bps. The real growth was 20% and without currency fluctuation is 13%. The company is growing business in Argentina. The margin is less due to money spend on promotion in the quarter.
Latin America and Africa are expected to show strong growth in next quarter on back of festive season.
UK contributes 13% of international business, grew by 10% to Rs 53 crore and had margin of 11%, growth of 80 bps. The sales grew due to Cuticura, Bio-Oil and Touch of Sliver.
The company has launched multiple innovation products across geographies, with focus on premierization, which will help its margin in future.
Ad spend is expected to go up in coming quarters.
The company has a forex committee that monitors all the exposures and takes calls on hedging the exposures. It has covered its near term exposure on oil payables till Dec'11, well before the INR depreciation started in Aug'11. As on 30th Sep'11, it had import exposure of US$22 million. The earliest exposure is falling due in Jan'12. This exposure has resulted in a mark to market impact of Rs 11 crore in the standalone financials. The net exposure is US$13 million and impact in the standalone financials after revaluation of export receivables is Rs 8.5 crore. There is a mark to market impact of Rs 8 crore in overseas subsidiaries on account of revaluation of inter company loans. These are long term loans and hence mark to market impact will reverse as and when the currencies appreciate. The total mark to market impact at consolidated level aggregates to Rs 16.5 crore.
Dollar debt on repayment till November is covered. The company pays $ 20 mn on quarterly basis.
The management said that it has not seen any slowdown in rural market in Q2 and has increased rural initiative in last two quarters. Rural market contributes 35% of its sales.
Tax rate for the full year will be 23%.

A Mahendran, MD GCPL in an interview with Business Standard.

- No more acquisitions this year (but I read elsewhere that they will increase stake in Darling group to 100%)
- Focus is on organic growth and integrating last years acquisition
- Expect 20% growth this year

Apparently GCPL is now considering buying a israeli insectcide company.

Stock has been silently going up ever since they sold some shares to singapore government (Temasek) at around 410 per share in jan this year.