According to Godrej Consumer Products, the 1HFY24 Latin America and SAARC businesses’ profitability was flat. As a result, devaluation has little overall effect on profitability.
The large FMCG business, Godrej Consumer Products, said on Friday that the Argentinean peso devaluation had a negative mid-single digit impact on the company’s consolidated sales performance in the third quarter of FY24, but that the impact on profitability as a whole was negligible.
The company’s announcement follows the decision to devalue the Argentine Peso to the US dollar by the newly elected new government in Argentina.
The value of the Argentine Peso to US Dollar fell from 361 to 808 in December 2023.
“We think the government of Argentina is making progressive decisions with these bigger measures since they will eventually support economic growth and raise consumption even more. Additionally, by making forex more readily available, these actions would facilitate economic activity within the nation “Godrej Consumer Products stated in a stock exchange filing on Friday.
After the reporting period, all amounts must be restated using a general price index into the measuring unit current in accordance with IndAS 29.
It further stated that accounting standards mandate that the YTD Statement of Profit and Loss be translated at the closing rate for display in consolidated financial statements, given the hyperinflationary pressures affecting the Argentinean economy.
Therefore, the 3QFY24 records the impact of the Argentine Peso’s devaluation on the financial statement for the 9MFY24.
According to Godrej Consumer, “this has resulted in a negative mid-single digit impact on consolidated sales performance in 3QFY24.”
Furthermore, in 1HFY24, the profitability of the SAARC and Latin American businesses was flat. The FMCG major continued, “Therefore, the overall impact of devaluation on profitability remains minimal.”
Godrej Consumer has stated in its business update for the quarter ended December 2023 that it anticipates a low-single-digit drop in revenues at a consolidated level in rupee terms.
The FMCG company anticipates a mid-single-digit volume increase on a consolidated level (organic) in the third quarter of FY23. It anticipates a low-single-digit sales decline in rupee terms due to the accounting impact of hyperinflation and GAUM (Godrej Africa, USA, and Middle East) and LATAM currencies, despite a double-digit increase in sales in constant currency.
According to Mind, “reported sales growth is flat in terms of Indian rupees, while reported volume increase is probably in the high single digits. Despite much higher category development efforts, we continue to generate year-over-year growth in EBITDA (incl. Forex) margin,” Godrej Consumer stated.
The extreme devaluation of the Argentine peso from 361 to 808 due to hyperinflation accounting has negatively impacted the revenue of the Latin America, or LATAM, sector, according to the statement.
Godrej Consumer shares were up 0.52% at ₹1,161.50 per share on the BSE at 1:55 p.m.
