“The FMCG universe is likely to register lower sales growth of 10.9 per cent year-on-year (y-o-y) due to muted sales growth in Hindustan Unilever (HUL) and ITC, and lower price growth for most other companies. However, volume growth is expected to be strong for most categories. Lower input costs and excise benefits will result in margin expansion and, hence, we expect operating profits for the sector to grow 21.5 per cent y-o-y,” say ICICI Securities’ analysts.
“The volume-led growth will be led by led by companies like GlaxoSmithKline Consumer Healthcare, Nestle and Dabur,” forecasts Anand Shah, FMCG sector analyst with Angel Broking, who expects the sector to record a 12 per cent net sales growth.
With most companies either effecting a direct rollback in prices (HUL, Marico) or offering various trade and consumer promotions, growth in sales will be mainly volume driven. “FMCG companies will post 8.7 per cent growth in sales, 15.2 per cent in Ebitda and 13.6 per cent in net profit. Excluding HUL, the growth would be much better at 15.4 per cent in sales, 20.2 per cent in Ebitda and 24.3 per cent in net profit,” says Pritee Panchal, FMCG sector analyst with SBICap Securities.
However, going ahead, while the makers of personal and packaged goods should benefit with no letdown in consumer demand, especially with the benefits of the National Rural Employment Gurantee Scheme and farm loan waivers causing rural demand to hold strong, weak macro-economic conditions, coupled with falling income levels, could lead to moderation in consumer spending in the ensuing quarters.
“If the monsoon is poor, it will affect consumer purchasing power. There could be a risk to revenues for the next three quarters, but this will be at least partially mitigated by social sector spending, as laid out in the Union Budget,” cautions an HSBC Securities results forecast.
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|(Figures in per cent) Source: Analyst reports|