BackQ4 to set the trend for consumer products firms
Q4 to set the trend for consumer products firms
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In the March quarter, the performance of two large consumer products companies—ITC Ltd and Hindustan Unilever Ltd—will be closely watched. One has been slapped with a hefty increase in excise duties, which will reflect only partly in
But rising inflation, especially food inflation, appears to be eating into consumer wallets and is affecting demand. A year ago, companies had hiked prices in response to rising commodity prices and the willingness of the consumer to pay higher prices. Now, the market is flooded with price reductions, free volumes at the same price and other promotional offers. These are bound to have an effect on profitability, which will be visible in the current quarter.
The current quarter will also see the partial impact of the increase in excise duties in the Budget.
On the raw materials front, food-related raw material costs will be higher except for a few commodities such as coffee and edible oils. Sugar prices have come sharply off their peaks, though it may still be higher on a year-on-year basis. Crude-based raw materials will see a decline over last year. But operating costs such as freight and salaries will show inflationary trends. Investors will be watching what company managements have to say about the demand outlook for fiscal 2011, and their strategies to get growth back.
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