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Godrej Consumer Products + ITC Result Review

January 21, 2008

Godrej Consumer Products
Net profit for the quarter came at Rs430m, up 8.7% YoY driven by a 14.6% sales growth. On the EBITDA margin, GCP did well to absorb increased raw material costs. The soaps division outperformed the industry yet again this quarter driven by a 5-6% price hike and strong volume growth.

Keyline, GCP’s UK business recovered after a poor performance last quarter, posting a 6.6% sales growth and 20% growth in net profit. Rapidol, GCP’s subsidiary in South Africa showed flat growth, impacted adversely by the rupee appreciation.

ITC Ltd:
ITC’s pricing strategy, loading price hikes in favor of mid-end cigarettes and not leaving any ‘pricing gaps’ across its cigarette portfolio, is paying off. Its cigarette EBIT profits increased 16% in 3QFY08 and 13.7% in 9mFY08 despite declining volumes. Volume trend is also improving, with 3Q volumes declining less than 1%.

3QFY08 net profit growth of 15.8% yoy were in-line with estimates. Positive surprise was 16% growth in cigarette EBIT profits, while growth hotels and agri-business have recovered.

ITC’s foods portfolio (excluding ‘Bingo‘ brand) has broken even in 3Q. EBIT loss margins for new FMCG business continue to decline, despite scaling up of expenses related to the launch of new personal care products under the ‘Fiama di Willis‘ brand in 3Q.

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