Godrej Industries’ Chemical Segment Disappoints in Dec 2012

Godrej Industries (GIL), which has got a presence in various segments like FMCG, Real Estate and Agro Chemicals, announced its December 2012 financial performance. While the consolidated topline stood at Rs 1713.14 crore, the bottomline for the quarter stood at Rs 158.91 crore as against Rs 1409.10 crore and Rs 62.64 crore in December 2011.

However, one should not jump to the conclusion about the results being good. Adjusted for the exceptional items (Rs 131.33 crore from profit from sales of investments), the bottomline for the December quarter stands at just Rs 27.58 crore as against Rs 30.06 it had achieved in the December 2011 quarter.

On the segmental front, Godrej Consumer Products (GCPL) which is a consumer product division and Godrej Properties have posted a strong financial performance for the quarter. In GCPL (GIL holds 21.60 per cent), where the topline has stood at Rs 1692 crore, an EBITDA of Rs 285 crore and net profit of Rs 172 crore, a growth of 26 per cent, 6 per cent and 3 per cent respectively has been reported. It was mainly driven by the exports growth (up by 34 per cent YoY).

In Godrej Properties, the total income for the quarter stood at Rs 268 crore and the bottomline stood at Rs 35 crore, showing a growth of 58 per cent and 24 per cent respectively YoY. The company demonstrated a strong momentum in ongoing sales. Here the total booking area now stands at 1.04 million sq ft in Q3FY13, over 0.57 million sq ft in Q3FY12.

The total booking value stood at Rs 672 crore in the December 2012 quarter as against Rs 364 crore in December 2011. The company has added 5 new projects with a 4.3 mn sq ft saleable area to the portfolio. Here, GIL holds 61.50 per cent stake. With the scenario improving in the realty sector, the average realisation has improved in the quarter.

The Chemicals business, however, continued to be impacted due to difficult global economic environment and also on account of the raw material price fluctuation and scheduled maintenance shut down expenditure. Here the topline stood at Rs 302 crore as against Rs 332 crore in December 2011. It, however, witnessed a slide on the bottomline front where it posted a loss of Rs 4 crore as against a profit of Rs 28 crore in December 2011. The Agricultural Business managed to show a decent growth.

Overall the results have been below expectations. This may result into the scrip witnessing some decline on the bourses. We are of the opinion that it should be taken as an opportunity to accumulate GIL shares.