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Godrej Consumer Products Ad & Publicity spends up in Q3-17

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BENGALURU: Leading emerging markets FMCG player Godrej Consumer Products Limited (GCPL) increased its advertising and publicity expenses for the quarter and nine month period for the period ended 31 December 2016 (Q3-17, current quarter, 9M-17, YTD respectively) as compared to the respective periods of the previous year. The company spent 11.9 percent more towards this expense head at Rs 191.94 crore in Q3-17 as compared to Rs 171.53 crore in Q3-16. In 9M-17, GCPL spent 9.3 percent more at Rs 563.03 crore as compared to Rs 515.15 crore in the corresponding nine month period of the previous year.

While in terms of absolute rupees advertising and publicity spends increased in Q3-17 and 9M-17 as compared to Q3-16 and 9M-16 respectively, in terms of percentage of Total Income from Operations or TIO, YTD the percentage was constant at 7.9 percent. In Q3-17, the company’s ad and publicity spends were 7.7 percent of TIO, while in Q3-16 they were 7.5 percent of TIO.

Please refer to the figure below.

The company in its earnings release says that Q3-17 consolidated constant currency net sales increased by 12 percent year-on-year during which India business primary sales were flat while secondary sales increased by 2 percent on year-on-year basis despite demonetisation challenges, while international business sales grew by 28 percent year-on-year, on a constant currency basis.

On an actual basis, GPCL TIO increased 8.8 percent y-o-y to Rs 2,485.77 crore in Q3-17 from Rs 2,285.74 crore in Q3-16. Profit after tax (PAT) in the current quarter declined 4.3 percent y-o-y to Rs 351.78 crore (14.2 percent of TIO) from Rs 367.75 crore (16.1 percent of TIO). The company says that Q3-17 consolidated net profit and EPS, without exceptional items, increased by 5 percent.

In itsIndia business review GCPL shared the following insights:

Household Insecticides 

Household Insecticides delivered a relatively resilient performance with sales decline of 2 percent. The company says that it made healthy media investments during the quarter and gained market share. It says that it is also driving improvements in penetration rates led by innovative launches, awareness creating campaigns and activations. 

Soaps 

Soaps performance improved sequentially as primary sales declined by 6 percent with a high single digit decline in volume terms. This decline in volume was partly driven by the transient effect of the withdrawal of promotions, price increases and adverse impact of demonetisation. GCPL says that it has initiated selective price increases in our portfolio and are scaling back consumer and trade offers.

Hair Colours 

Hair Colours primary sales declined by 2 percent, while crème continues to be a lead growth driver with strong double-digit growth. During the quarter, Godrej Expert Rich Crème reached its highest ever market share on an exit basis. GCPL says that its effective communication campaigns, along with competitive media investments, have widened Godrej Expert Rich Crème’s distribution and penetration lead over competition. 

Liquid Detergents 

Liquid Detergents saw a reasonable growth performance. Primary sales increased by 2 percent, despite a delayed winter and demonetisation. Demand was to some extent impacted by demonetisation, given the semi-discretionary nature of the category.

Air Fresheners 

GCPL says that Godrej aer now ranks number 2 in the overall air care market. We continue to gain share, aided by innovations and strong execution. 

Health and Wellness 

GCPL says that its Health and Wellness portfolio of hand washes and hand sanitiser, under Godrej protekt, has been successfully introduced in general trade. 

CintholDeo stick 

The recently launched Cintholdeo stick for men and women has been well received by consumers. Godrej plans to continue to support this launch with innovative consumer engagement initiatives and impactful communication. 

Company speak

Commenting on the financial performance of Q3-17, GPCL chairman Adi Godrej said, “Despite a tough operating environment, we continued to deliver ahead-of-the-market profitable growth. Our 3QFY17 consolidated constant currency sales increased 12 percentand constant currency EBITDA increased 17 percent. We continue to deliver EBITDA growth ahead of sales growth, despite a strong base from the previous year.

In India, while demonetisation has resulted in some near-term disruptions, we have outperformed the overall market with secondary sales growth of 2 percent during the quarter. Our go to market approach has been resilient and dynamic. We have been disciplined in our execution and have worked closely with our trade and retail partners to deal with the situation. We have also invested competitively in brand building and innovations. Through our focus on operating efficiencies and judicious cost management, our EBITDA, too, has increased by 15 percent.

Our International business, too, performed well with revenue growth of 28 percent and EBITDA growth of 19 percent, in constant currency terms, led by continued strong performance in Africa.

Going forward, remonetisation should result in growth normalising in India over the next few months. In FY-18, implementation of the GST will provide strong momentum for a much better economic environment and stronger consumer demand.

We are relentlessly focusing on our strategy and continuing to invest in building a sustainable platform for the future. At the same time, we are driving our core to full potential, ensuring execution excellence and building on our agile and high performance culture.”

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