Slowdown blues aren’t plaguing fast-moving consumer goods companies. Sales and profits for FMCG companies clocked yet another quarter of strong growth.

This spurt was not driven by product price increases alone; sales volumes showed that FMCG products continued to fly off the shelves.

Listed FMCG companies that have declared results so far have grown sales by 17 per cent in the June 2012 quarter over the year-ago period.

The March 2012 quarter registered an 18 per cent sales growth. Net profits (adjusted for one-time incomes or expenses) vaulted 30 per cent in the June 2012 quarter, well ahead of the 25 per cent growth in the March quarter.

Volumes balloon

While product price increases did help, sales growth for most players found stronger support from higher volumes.

Marico recorded a stunning 14 per cent growth in volumes sold, while HUL maintained its 9 per cent volume growth. Volumes for Dabur India’s domestic operations grew 12 per cent.

Segment-wise, soaps and detergents were robust. Top player HUL saw a solid 24 per cent segment growth. Second-in-line soaps player Godrej Consumer Products clocked a 42 per cent sales growth in soaps with an underlying 24 per cent volume expansion.

A rural thrust and consumers moving from loose oils to brands helped Marico’s 22 per cent Parachute Coconut Oil sales growth. HUL’s food segment pushed off its lethargy, growing a strong 17 per cent. Dabur’s food segment grew 35 per cent, driven by fruit juices. But pure-play food companies such as GSK Consumer, Nestle and Britannia grew much slower.

FMCG companies also kept costs under check by going in for better operations and inventory management. Godrej Consumer, for example, consolidated manufacturing hubs for its South Africa and Mozambique operations.

As a result, while primary raw material costs have not corrected and the rupee is still high, material costs for all FMCG makers have dropped as a proportion of sales in the June quarter.

These cost savings were channelled into advertising and promotion — companies had earlier been compromising on adspends to maintain margins. Adspend, as a proportion to sales, shot up to 12.7 per cent in the June 2012 quarter; it had been less than 12 per cent for several earlier quarters. Marico, HUL and Dabur have especially bumped up adspend.

Caution ahead

However, companies aren’t gung-ho about the next few quarters, following the uncertain monsoon. Poor rains deliver a double whammy – squeezing consumer demand while rendering agri-commodity inputs costlier. A weak rupee is also playing spoilsport with key raw materials such as palm oil imported.

In their conference calls, companies such as Marico, Dabur, Godrej Consumer and HUL, noted both future cost pressures and scepticism over near-term consumer demand.

(This article was published on August 16, 2012)
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