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Business News/ Companies / Company Results/  FMCG cos may report low-to-mid single-digit volume growth in Q4
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FMCG cos may report low-to-mid single-digit volume growth in Q4

Marico is anticipating a “slight uptick” in volumes in its fourth quarter India business. In the December quarter, Marico had reported a 2% jump in quarterly volumes in India.

Hgh inflation over the last two years has significantly affected consumption in the mass segment hurting volume growth for makers of tea, soaps, shampoo and detergents. (Bloomberg)Premium
Hgh inflation over the last two years has significantly affected consumption in the mass segment hurting volume growth for makers of tea, soaps, shampoo and detergents. (Bloomberg)

New Delhi: Consumer goods makers are likely to report low-to-mid single digit growth in March quarter volumes as demand remains largely muted.

On Friday, packaged consumer goods company Marico said FMCG demand sentiment stayed consistent vis-à-vis the preceding quarters with trends in urban and rural consumption largely converging. The company is anticipating a “slight uptick" in volumes in its fourth quarter India business. In the December quarter, Marico had reported a 2% jump in quarterly volumes in India.

“In Q4FY24, the domestic business posted a slight uptick in volume growth on a sequential basis owing to steadying trends in the majority of the portfolios," the company said in a filing to the exchanges. The volume of Parachute Coconut Oil grew in low single digits as Marico saw a continuing revival in loose to branded conversions amidst firming up of copra prices, which was along expected lines. Saffola oils’ volume grew in mid single digits as trade-led headwinds subsided with stable input and consumer prices.

Consolidated revenue grew in low single digits, moving back into positive territory after three quarters, due to incremental anniversarizaton of pricing cuts in key domestic portfolios, the company said. “We expect consolidated revenue growth to trend upwards, with domestic revenue growth outpacing volume growth in the quarters ahead," according to the company’s Q4 update. During the quarter, copra prices increased, while edible oil and crude oil derivatives remained stable. This could aid "strong" gross margin expansion on a year-on-year basis for the company.

On Friday, Godrej Consumer Products Ltd said it expects to deliver high-single digit underling volume growth in the March quarter. "Operating conditions in India continue to remain subdued. Our India organic business continued to deliver strong underlying volume growth at high-single digit with growth being broad-based across both home care and personal care. While demand in household insecticides has been subdued due to an extended winter in the North and East, our GoodKnight Agarbatti launch was well received by consumers," the company said in its quarterly update.

Additionally, Dabur India warned of sluggish demand trends in the last quarter.

The maker of Vatika shampoo expects to report mid-single digit growth in its consolidated revenues in the quarter ended March. The company observed sluggish demand trends over the quarter, noting a pickup in rural growth helped by price reductions in staples. This led to the gap between rural and urban narrowing. "With a positive outlook for the rabi crop harvest and monsoon forecast to be normal, we expect consumption to pick up in the coming months. Dabur's consolidated revenue is expected to register mid-single digit growth during Q4 FY24," the company said in its quarterly update released Thursday. Analysts say Dabur is likely to report a 3.5% jump in March quarter volumes.

Analysts on the other hand said volume growth for the packaged consumer goods sector will remain “challenging" with low-to-mid-single-digit volume growth driven by demand in urban markets.

To be sure, high inflation over the last two years has significantly affected consumption in the mass segment hurting volume growth for makers of tea, soaps, shampoo and detergents.

“FMCG products have the highest penetration in rural areas and have been impacted the most compared to other consumer baskets. The mass segment has a large user base, but the income growth is the slowest," analysts at Motilal Oswal Financial Services (MOFSL) said. High inflation has significantly reduced a household’s ability to consume more.

Analysts at Motilal Oswal expect volume growth to bounce back this fiscal. “Additionally, households are over-indexed on food in their cost mix. With softer general inflation and price cuts for FMCG, the income-to-cost mix has been gradually stabilizing over the last 6-12 months. Macro indicators are also showing steady improvement (further details provided in the respective section). MOFSL believes that the volume growth has bottomed out and anticipates a steady improvement over FY25 and FY26," they said.

Meanwhile, Abneesh Roy, executive director & head of Research Committee, Nuvama Institutional Equities, forecasts a 2% revenue growth for fast moving consumer goods makers in the March quarter, with a 5% jump in quarterly profits. “Hence, revenues are likely to grow slightly faster and profits slower than Q3 trends," he said. Roy indicated that rural demand remains a “concern" with flat-to-low single digit growth in many categories. While, winter demand picked up a bit for winter care products, but distributors were unwilling to stock up much.

Nuvama Wealth and Investment Ltd expects HUL to report 3% volume growth in the March quarter with year-on-year revenue growth of 1%.

During the quarter gross margins expanded for many companies as key commodities cooled, but the pace of expansion is now slow. Meanwhile, companies have ramped up ad spends.

In an interview with Mint last month, Sunil D’Souza, managing director and CEO of Tata Consumer Products Ltd, said the company is “optimistic" about volume growth coming back in the next three to six months.

Meanwhile, in a separate report, analysts at Elara Securities said the demand for quick service restaurants or QSRs remains muted. "QSRs are expected to report a same store sales growth decline between 1% year-on-year and 14% year-on-year. However, after underperforming in the past few quarters in profitability, gross margin of QSRs may be stable quarter-on-quarter due to stable raw material inflation. However, Ebitda margin may decline quarter-on-quarter due to higher promotion, discounts and marketing costs," they added. Ebitda stands for earnings before interest, taxes, depreciation, and amortization.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 05 Apr 2024, 07:36 PM IST
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