India's Godrej Consumer slumps 9% after flagging weak Q3 demand

Godrej Consumer Products

09/12/2024 06:43

By Sethuraman N R
       Dec 9 (Reuters) - 
    Shares of India's Godrej Consumer Products  GOCP.NS  slumped
9% on Monday, set for their worst day since March 2020 and
dragging down its peers in the fast moving consumer goods sector
after the firm warned of stress on demand and profit margins in
the third quarter.
  
    The stock fell to its lowest since Jan. 18, its biggest
one-day percentage drop since the onset of the pandemic. The
decline dragged down the consumer goods index  .NIFTYFMCG  by
2.2%. The benchmark Nifty 50  .NSEI  was down about 0.1% on the
day.
    Including Monday's decline, the consumer index has shed
about 14% so far this quarter and is set for its worst ever
quarterly performance as Indian consumer companies continue to
feel the pinch of still-high inflation and a consequent fall in
demand.
    Godrej Consumer said on Friday that two-thirds of its India
business is under demand and margin stress due to higher raw
material costs and unfavourable weather.
    The company's update will "likely add to investor concerns"
on the consumer industry as a whole, which has been facing a
slowdown, Jefferies said in a note.
        To partly offset higher costs in palm oil, a key
ingredient for Godrej's soap business that contributes one-third
to its standalone revenue, the company undertook measures
including price increases during the quarter.
    "Such pricing actions typically have minimal impact on
category consumption but do result in reduced inventory across
wholesale and household pantry," Godrej said. 
    The warning by Godrej will also impact peers, Jefferies
said, adding that recent analyst meetings with Hindustan
Unilever  HLL.NS  and Colgate-Palmolive India  COLG.NS  have not
provided confidence about a recovery in consumption.

 (Reporting by Sethuraman NR; Editing by Sonia Cheema)
 ((Sethuraman.NR@thomsonreuters.com; (+91 9945291420); Reuters
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))