Godrej Consumer Products swung back to black in Q4FY25, however, the share price fell 3.14% to an intra-day low of Rs 1,211.50. The company’s profit before tax came in at Rs 670 crore, which was down 4% year-on-year in the fourth quarter of FY25, and margins remained under pressure. Also, the company said that demand conditions in India have continued to be impacted by headwinds in urban consumption. A surge in palm oil prices by more than 50% is adversely impacting its EBITDA margins.
Here is a look at the key reasons why the investors are worried
Motilal Oswal on Godrej Consumer
The brokerage house said that the company is sustaining margin pressure, which is likely to continue. The company reported a higher tax outgo that hurt adjusted net profit. The company’s adjusted profit after tax declined 25% YoY to Rs 430 crore. The gross margins shrank 360 basis points YoY to 52.5% while its EBITDA margin contracted 140 bps YoY to 21.1% as ad spends rose 1% YoY and other expenses grew 9% YoY. In FY25, net sales, EBITDA, and APAT were up 2%, down 2%, and down 4% YoY, respectively.
Nuvama on Godrej Consumer
The company reported a lower-than-expected India business volume growth. The company’s India business grew 4% YoY, which was a bit lower than Nuvama’s estimates, which suggests that the company is witnessing softer domestic demand. Nuvama also iterated that margins are still under pressure. Godrej’s consolidated gross profit margin contracted 362 bps YoY to 52.2%. The company’s reported net profit or profit after tax declined by 8.1% YoY to Rs 443.3 crore, which was 11% lower sequentially. The adjusted net profit fell 9% YoY and 11.2% QoQ.
JM Financial on Godrej Consumer
The company’s profit before tax pre-exceptionals and forex impact declined by 3% YoY, falling to Rs 670.8 crore in Q4FY25 from Rs 691.2 crore in the same period a year ago. Also, the company’s tax expense increased significantly year-on-year. Taxes stood at Rs 227.5 crore, an increase of 9% from Rs 208.7 crore in Q4FY24. Not just that, Godrej Consumer Products’ other business areas, Latam (Latin America), reported an 11% YoY decline in sales. However, the brokerage house has a ‘Buy’ rating on the stock.