Companies

Despite tame sales, FMCG firms seen in profits in Q2

Our Bureau Mumbai | Updated on March 12, 2018 Published on October 09, 2012

Volume growth for FMCG firms will be subdued despite normalised defence sales demand. — A. Roy Chowdhury

Strategy to focus on premium goods





Despite the economic slowdown and a not-so-good monsoon, fast moving consumer goods (FMCG) companies are likely to post strong financial growth in the July-September quarter of FY13, research firms have indicated.

The growth for most of these companies in the second quarter (Q2 FY13) will be pricing-led and their strategy will be to focus on premium goods. During the quarter, raw material prices of edible oils and agri-commodities have remained soft and would benefit most companies in expanding their margins, reports have indicated.

Research firms such as Centrum, Religare Institutional Research, and Espirito Santo said the companies are expected to post a strong bottomline in this quarter. PAT (profit after tax) is expected to be in the range of 17.5 per cent to 29 per cent.

Earnings

Earnings are likely to grow 19 per cent year-on-year (y-o-y) even as Marico and Godrej Consumer Products are expected to record the highest growth at 38 per cent y-o-y and 23 per cent y-o-y in earnings, driven by a higher operating growth. Colgate and HUL are likely to record a y-o-y growth of 22 per cent and 21 per cent respectively. Dabur is expected to record the lowest earnings growth of 11 per cent.

Volume

“Volume growth will be subdued despite normalised defence sales demand. Margin expansion is expected on the back of softening of raw material prices. However, advertising and promotional expenses will continue to be high,” said a Centrum report.

Operating margins, on the other hand, are expected to improve 50 basis points y-o-y for the companies. However, compared to the previous quarter (which was up 150 basis points y-o-y), this would be muted given the fact that companies have taken several price hikes and input costs have remained stable.

Nestle is likely to report moderate volume growth and Colgate double-digit growth in the toothpaste category. GSK will be in high single digits, agencies have said.

The BRICS consumer market would record 16 per cent y-o-y growth to Rs 13,800 crore in Q2, Centrum added. Marico and Godrej Consumers are to benefit from acquisitions, while volumes will drive revenue growth for most companies.

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Published on October 09, 2012
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