New Delhi: Fast-moving consumer goods companies may report mid-single to low-double-digit volume growth for the March quarter and see some relief on their margins as key commodities prices showed signs of easing. .
In its quarterly update published on Thursday, Dabur India Ltd said that there has been a marginal recovery in demand in urban and rural markets, though it has not recovered completely.
“While urban markets have returned to positive volume growth, rural markets are still muted. Despite consumption pressures in the near term, some good fruits are emerging, such as moderation in inflation, improvement in consumer confidence and increase in government spending,” the company told the exchanges. Overall, Dabur’s consolidated revenue in the mid-single It is expected to increase the -digits in Q4, it said.
Analysts at Nuwama Institutional Equities expect companies under their coverage to report an average volume increase of 6.18% during the quarter. Meanwhile, Motilal Oswal Investment Services said volume growth is likely to remain subdued for FMCG companies during the quarter, “especially as there are no clear signs of revival in rural demand”. March quarter.
Godrej Consumer Products Ltd (GCPL) said that demand in India remained stable during the quarter, with the FMCG sector expected to see a gradual recovery in growth. The company is expected to post double digit growth during the quarter.
“The performance of our India business has exceeded expectations, especially on the volume front. We expect to deliver double-digit volume and value growth. The growth of our domestic branded business was very strong, registering volume and value growth in the teens. This is in line with our strategy to usher in volume-driven category growth. Overall, growth was broad-based, driven by double-digit volume and value growth in both home care and personal care,” it said in the update.
Analysts at Nuwama said GCPL cut soap prices by 9-10% in the third quarter of the fiscal, and as a result, volumes for soaps are expected to increase.
Overall, analysts said while urban continued to outperform rural markets, most companies reported sluggish demand in rural areas as inflation continued to haunt household budgets. Accordingly, companies with higher exposure to rural sector may underperform, he said.
Marico Ltd said in its quarterly update to the exchanges on April 3, “While urban and premium categories were stable, moderation in broad-based commodity inflation augurs well for overall consumption trends, especially in rural markets.” A recovery in FMCG demand is projected on a variety of macro indicators, a healthy monsoon will be key for it to materialise. The India business saw some year-on-year improvement in volumes as compared to the previous quarters and remained in the mid-single digits,” it added.
Analysts say a fall in raw material prices would bode well for margins. For example, crude oil prices fell 17.7% in March from a year earlier, while Malaysian palm oil prices fell 35%.
“Given the improved product mix and reduction in raw material prices, paint firms are likely to see improved margins year-on-year as well as sequentially. Analysts at Nuwama said strongest growth is expected in Hindustan Unilever, Britannia, Berger Paints and GCPL, while weakest growth could be seen in Emami, United Spirits and Marico.
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