Fast moving consumer goods companies in India are expected to report strong sales in January-March quarter, as most of them raised product prices to offset high input costs. However, the price hikes were limited and so will not be able to check margin erosion over the three-month period, analysts say.
Volume growth, that is the actual number of units sold, is also expected to be steady, and that will also boost sales.
Analysts on average expect a 16-20% growth in revenues of FMCG companies, barring GodrejConsumer Product . GCPL’s sales growth will be higher than most other companies on the back of consolidation of several acquisitions that it made during the last financial year (2010-11) in the domestic and international markets.
Increasing costs of raw materials like, for instance, copra (a key input for coconut oils), palm oil and linear alkyl benzene (both used in soaps) have been eating into the margins of FMCG companies and that has forced them to increase product prices.
Marico hiked price of its Saffola and Parachute oil brands by up to 8% and Dabur raised prices of its hair oils by 4-8% during January-March. Hindustan Unilever, which is the largest consumer goods company in India, raised soap prices by 4-10% and detergent prices by up to around 10% during the quarter, according to several research reports.
However, analysts say these price hikes do not cover the entire increase in input costs and thus will only cushion the decline in margins.
“Rise in cost of commodity inputs will result in marginal decline in profitability, but moderate price hikes and benefits of operating leverage will limit quarter-on-quarter operating margin decline,” according to a report by Standard Chartered
BY ANIMA SINHA
PGDM - 2 sem
Volume growth, that is the actual number of units sold, is also expected to be steady, and that will also boost sales.
Analysts on average expect a 16-20% growth in revenues of FMCG companies, barring GodrejConsumer Product . GCPL’s sales growth will be higher than most other companies on the back of consolidation of several acquisitions that it made during the last financial year (2010-11) in the domestic and international markets.
Increasing costs of raw materials like, for instance, copra (a key input for coconut oils), palm oil and linear alkyl benzene (both used in soaps) have been eating into the margins of FMCG companies and that has forced them to increase product prices.
Marico hiked price of its Saffola and Parachute oil brands by up to 8% and Dabur raised prices of its hair oils by 4-8% during January-March. Hindustan Unilever, which is the largest consumer goods company in India, raised soap prices by 4-10% and detergent prices by up to around 10% during the quarter, according to several research reports.
However, analysts say these price hikes do not cover the entire increase in input costs and thus will only cushion the decline in margins.
“Rise in cost of commodity inputs will result in marginal decline in profitability, but moderate price hikes and benefits of operating leverage will limit quarter-on-quarter operating margin decline,” according to a report by Standard Chartered
BY ANIMA SINHA
PGDM - 2 sem
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