Godrej Consumer Products : GCPL 2Q FY 2018 results

FINANCIAL OVERVIEW

2Q FY 2018 FINANCIAL PERFORMANCE SUMMARY:

• 2Q FY 2018 consolidated constant currency sales increased by 10%* year-on-year

  • India business sales growth of 11%* year-on-year, led by 10% volume growth

  • International business sales growth of 9% year-on-year, on a constant currency basis

• 2Q FY 2018 consolidated constant currency EBITDA increased by 19%

• 2Q FY 2018 consolidated net profit and EPS (without exceptional items) increased by 15%

• The board has declared an interim dividend of 100% (INR 1.00 per share)

  *Comparable growth assuming GST in the base quarter sales

  CHAIRPERSON'S COMMENTS Commenting on the financial performance of 2Q FY2018, Ms. Nisaba Godrej, Executive Chairperson, GCPL, said:

  "We have sustained our resilient performance in the second quarter of fiscal year 2018 and delivered double-digit growth in sales and earnings. At a consolidated level, our sales grew by 10%*, driven by 11%* sales growth in India and 9% sales growth in our international business, in constant currency terms. Our EBITDA growth was well ahead of sales growth, with an increase of 19%, in constant currency terms.

  In India, we remained agile and navigated the GST driven channel disruptions well to deliver 10% volume growth (on a base of 9% growth in 2QFY17), alongside delivering a strong EBITDA growth of 24%. Post GST, the trade channels are getting back to normal and consumer offtakes have improved. We remain optimistic that consumer demand will continue to pick up in the second half of the fiscal year.

  Our international business continued to perform well in Africa. We also saw our performance recover in Latin America. While Indonesia sales growth remained weak, sales improved sequentially, along with an expansion in margins. We continue to remain positive about the growth prospects of our international portfolio in the second half of this fiscal year.

  Overall, we remain relentlessly focused on becoming more agile, increasing the pace of innovations, enhancing our go-to-market approach and investing in our key talent, to continue to outperform the market and deliver industry- leading returns."

  *Comparable growth assuming GST in the base quarter sales

  BUSINESS REVIEW - INDIA

  Performance Highlights

• 2Q FY 2018 India sales increased by 11%* to INR 1,347 crore

• 2Q FY 2018 Adjusted EBITDA increased by 24% to INR 335 crore

• 2Q FY 2018 net profit increased by 20% to INR 256 crore

Category Review Household Insecticides

Household Insecticides, optically, had a soft quarter, with a sales growth of 4%* on a strong base of 18% growth in 2QFY17 (2 year CAGR of ~11%). Growth to some extent was impacted by the weakness in formats like coils, which are more dependent on wholesale channel. We continued to gain market share across key formats. Personal Repellents is scaling up well with a market share in teen digits (on exit basis). We have continued to improve penetration rates in rural and urban markets and make competitive brand investments.

Soaps delivered robust performance with a sales growth of 26%*. This was led by strong double-digit volume growth. During the quarter, we also passed on the benefits of lower GST rates to consumers through price cuts. We recorded robust growth and market share gains in Godrej No. 1. This was driven by a focus on the core positioning of the brand, along with effective micro marketing initiatives and 360-degree media activations. Cinthol continued to deliver consistent growth and increase market share.

Hair Colours delivered a sales growth of 4%*, completely led by volume growth. Crème hair colours continued to deliver double-digit volume led sales growth. Sales of powder hair colours however were impacted by a disruption in the wholesale channel. During the

*Comparable growth assuming GST in the base quarter sales

quarter, Godrej Expert Rich Crème reached its highest ever market share in crème. Our

recently launched Godrej Professional range is being rolled out in the salon channel.

Godrej aer continues to maintain leadership position in the overall Air Care market and gain share, aided by innovations and strong execution.

Our Indonesia business performance, though remaining weak; has seen a recovery from the previous quarter. 2QFY18 sales declined by 1% (before sales promotion spends) and by 7% (after netting off of sales promotion spends). Sales growth was impacted by higher sales promotion spends in Household Insecticides in response to high sales promotion intensity by competition. Despite the weak sales performance, adjusted EBITDA margin increased by 150 bps due to rationalised A&P investments, Project PI (a cost savings initiative) and lower overheads. During the quarter, we launched HIT Expert aerosol with better efficacy and delivery mechanism (a double nozzle that covers more area in each spray) to shift the market focus from promotion-led competitive intensity to innovation.

Our Africa, USA and Middle East business continues to deliver consistent and double-digit growth momentum, with a constant currency sales growth of 13%. Hair extensions continue to deliver growth in the high-teens, in constant currency terms. Our adjusted EBITDA margin declined by 140 bps year-on-year due to upfront A&P investments in scaling up our wet hair care portfolio.

Our Latin America business saw strong recovery with a constant currency sales growth of 30%. This was driven by double-digit growth in Argentina and Chile. Adjusted EBITDA