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Consumer goods sales to sag in Q4

Consumer goods sales to sag in Q4
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First Published: Fri, Apr 16 2010. 12 26 PM IST
Updated: Fri, Apr 16 2010. 12 26 PM IST
Mumbai: Indian mid-cap consumer goods firms are expected to report a modest rise in sales as higher food inflation hurts buying, but low input costs will help maintain margins in the Jan-March quarter, analysts said.
A Reuters poll of brokerages found Britannia Industries is expected to post a sales growth of 9%, Marico by 10% and Colgate Palmolive by 16%.
“Higher food inflation has led to a slowdown in consumption which will affect sales of most of the firms. Discretionary spend has been curtailed especially at the lower end of the market,” an analyst with brokerage Prabhudas Lialdher told Reuters.
“This quarter there will be very little value growth as FMCG players have taken fewer price increases, so whatever growth is there will come from volume growth,” he said.
India’s food price index rose 17.70% in the 12 months to 27 March, while the fuel index was up 12.71%, government data showed on 8 April.
The profit growth at these firms is also likely to be slower than in previous quarters but lower raw material costs could provide a cushion, analysts said.
Marico is expected to maintain margins as input costs have come down but the price cut by the firm during the just-concluded quarter will hurt, they added.
“Falling raw material prices, like sugar for Dabur and copra for Marico would help curtail input prices thereby sustaining margins in the face of falling retail prices,” ICICI Securities said in a note.
Marico is seen posting a 30% rise in profit while Colgate Palmolive is seen posting a profit growth of 27% in the fourth quarter, according to the poll.
“The rise in operating costs due to higher crude oil prices and bottoming out of input costs, in the coming quarters will be a cause of worry for the FMCG firms,” said an analyst with a Mumbai-based brokerage.
“Moreover, the increase in prices of packaging material (which constitutes 8-10% of the costs of companies like Dabur and Marico) would put further pressure on margins, going forward,” he added.
Godrej defies trend
Bucking the general trend in the sector personal care products maker Godrej Consumer Products Ltd is expected to post a strong earnings performance.
“The company would continue to benefit from robust volume growth in both soaps and hair colour business. The international business is also expected to continue its growth momentum in the fourth quarter,” Emkay Securities said in a note.
The consolidation of the Godrej Sara Lee business is also seen aiding sales growth, analysts said.
According to the Reuters poll, Godrej Consumer is expected to post a 36% jump in profit riding on a 50% year-on-year spurt in sales.
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First Published: Fri, Apr 16 2010. 12 26 PM IST
More Topics: Consumer goods | FMCG | Marico | Britannia | Godrej |