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FMCG margins crimped, sales momentum to continue in June quarter

FMCG margins crimped, sales momentum to continue in June quarter
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First Published: Fri, Jul 15 2011. 11 35 AM IST
Updated: Fri, Jul 15 2011. 11 35 AM IST
Mumbai: Indian mid-cap consumer goods firms are seen taking a hit on their profitability in the first quarter of FY12, as stiff competition and higher costs strain margins, even as steady volumes and price increases drive revenues.
A Reuters poll of 17 brokerages has forecast 1% rise in quarterly profit for Colgate Palmolive, 9% for Godrej Consumer and 11% for Marico.
“Operating margins in this quarter are expected to be on the decline on account of high-cost inventory which they are carrying,” said Gautam Duggad, an analyst with Prabhudas Lilladher.
“There has been a decline in costs of certain commodities from the start of this year, but that will only get fully reflected in the second quarter of this fiscal year,” he said.
Britannia and Glaxosmithkline Healthcare are seen posting a net profit increase of 45 percent and 32%, respectively, as both companies are likely to benefit from softening of prices of key inputs.
Crude oil prices, which continue to remain high, have witnessed a steep 11% fall during the quarter and hence prices of crude-linked inputs have fallen quarter-on-quarter, though they are still high year-on-year.
Agri commodities such as sugar, wheat, palm oil, and copra have fallen but prices of barley, milk and titanium dioxide remain firm.
Food inflation has shown consistent decline from 16.7% in January 2011. India’s food price index rose 8.31% and the fuel price index climbed 11.89% in the year to 2 July, government data on Thursday showed.
Successive price increases taken by several consumer firms during the previous quarters will arrest the margin decline and also aid revenue growth, brokerage Emkay said in a note.
“This quarter’s revenue growth will shift from volumes to pricing. It will be driven by the recent price increases in home and personal care categories for most companies,” said Duggad.
The Reuters poll forecasts 19% rise in sales for Britannia, 15% for Colgate, 18% for Glaxo SmithkLine Consumer and 22% for Marico.
Godrej Consumer, however, is expected to lead the pack with a 56% rise in sales on account of the consolidation of its recent acquisitions. It had recently acquired African hair care firm Darling Group Holdings.
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First Published: Fri, Jul 15 2011. 11 35 AM IST
More Topics: FMCG | Consumer goods | Costs | Price rise | Godrej |