MOSL: ANNUAL REPORT THREADBARE (ART) | GODREJ CONSUMER PRODUCTS FY18: Subsidiaries’ weak op. performance drag overall return ratios
ANNUAL REPORT THREADBARE (ART) | GODREJ CONSUMER PRODUCTS FY18: Subsidiaries’ weak op. performance drag overall return ratios
GCPL’s FY18 annual report highlights the subdued operating performance of its subsidiaries leading to a) lower consolidated revenue growth at 6% to INR98.4b (Standalone: revenue up 11% to INR52.6b) and EBITDA growth at 9% to INR20.7b (Standalone: EBITDA up 17% to INR13.3b), and b) high Cash Conversion Cycle (CCC) of consolidated entity at 29 days (FY17: 35) v/s standalone CCC at -30 days (FY17: -12 days) primarily due to increased working capital requirement in Africa. This has led to consolidated return ratios (ROCE of 17% and ROE of 25%) being significantly lower than standalone return ratios (ROCE of 67% and ROE of 68% - ex investments in subsidiaries). Despite an improvement in the Cash Conversion Cycle, OCF declined to INR15.7b (FY17: INR17.4b) due to increase in other current assets by INR2b. Acquisitions over the past few years had led to increased intangibles (including goodwill of INR47.2b) at INR72.5b, 116% of net worth. Interestingly, GCPL has changed its future growth rate (increased) and discount rate (reduced) estimates for impairment testing of goodwill.
- Subsidiaries performance remains muted: Declining growth in Indonesia and Africa business’s failure to gather momentum led to muted revenue (subsidiaries’ derived) growth at 1% to INR45.8b (FY17: INR45.2b) and a 70bp decline in the EBITDA margins to 16%. Though EBITDA margins improved 100bp in Indonesia, it declined 240bp in Africa, USA & Middle East.
- Rising CCC in Africa dent operating cash flow: Our analysis of subsidiaries’ cash flow highlights stretching CCC days at 98 (FY17: 87 days). Subsidiaries’ CCC, excluding the Indonesia business, stood significantly higher at 129 days (FY17: 113 days) which we believe, majorly on account of African business. Consolidated OCF declined by INR1.7b to INR15.7b due to increase in balance with Govt. authorities and other advances by ~INR1b respectively.
Godrej Consumer Products is a consumer goods company, manufacturing and marketing Household and Personal Care products. Co. is engaged in the manufacture and sale of soaps, cosmetics and detergents. Co.'s Personal Care products include Godrej No.1 - soaps; Cinthol - soaps, deodorants, talcs and shower gels; Godrej protekt - washes, a hand sanitiser and a personal mosquito repellent spray; and Godrej expert - creme hair colour in a sachet, powder hair colour with a unique gel technology, and herbal hair colour. Co.'s home care products include Good Knight - mosquito repellents; HIT - household insecticides; Godrej aer - home and car air fresheners; and Godrej Ezee - liquid detergents.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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