Fast-moving consumer goods (FMCG) makers are likely to report a single-digit uptick in volumes amid “stable” demand trends in the second quarter of the ongoing financial year.
According to analysts at Elara Securities, FMCG product demand remained stable, with rural growth outperforming urban for the third consecutive quarter, albeit on a favourable base. Initially weak, demand increased later in the quarter, they added.
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Analysts at the brokerage, which tracks firms like Hindustan Unilever, Nestle, Dabur, Marico and Britannia, among others, said companies are expected to “report revenue and volume growth of 5.7 per cent year-on-year and 5.5 per cent year-on-year, respectively, in Q2FY25E, at a five-year compound annual growth rate (CAGR) of 9.6 per cent, the same as in Q1,” in a note.
Analysts at Motilal Oswal Financial Services also said that demand trends for staple companies remained stable quarter-on-quarter in Q2FY25, with rural markets outperforming urban areas for the third consecutive quarter.
“However, heavy rains and floods in certain regions have disrupted the supply chain. They also affected out-of-home consumption and consumer offtake, particularly in the beverages category,” they said in a note, adding, “food and beverage companies are likely to implement price hikes in response to rising costs of agricultural commodities.”
Mayank Shah, vice president, Parle Products, had earlier said these hikes were imminent. “You may see an increase of 3-5 per cent in the coming three-five months. A lot will depend on wheat and sugar prices – both key ingredients for us,” he had told Business Standard on the sidelines of the recently concluded World Food India.
The brokerage firm expects both the FMCG and jewellery verticals to either sustain or outperform their growth trajectory in the quarter, whereas quick service restaurants (QSR), paint, and liquor verticals are expected to see weakness in growth and profitability.
In its quarter update, the maker of Hajmola candy and Real fruit juices, Dabur India, said that while demand trends were improving, heavy rains and floods across the country impacted out-of-home consumption and consumer offtake during the quarter, which especially impacted its beverage business.
The company is expected to post a mid-single-digit decline in consolidated revenues in the quarter, also due to a distributor inventory correction exercise it undertook.
Marico Ltd, the maker of Parachute hair oil, said in an exchange filing that the sector witnessed stable demand trends with rural outperforming urban on a year-on-year basis for the third consecutive quarter.
“In the given context, the domestic business posted mid-single-digit volume growth, exhibiting improvement on a sequential basis,” it said.
While Parachute coconut oil posted close to mid-single-digit volume growth, Saffola oils posted low single-digit revenue growth, and value-added hair oils were subdued amidst competitive headwinds in the bottom-of-the-pyramid segment, “but we expect gradually improving demand trends,” the company said.
Meanwhile, Adani Wilmar is expected to post more hopeful results in the quarter.
“The company delivered another strong quarter with double-digit revenue growth of 16 per cent year-on-year, driven by strong execution in both the edible oils and food businesses. We are seeing growth in the food business across various categories and regions throughout the country,” it said in an exchange filing on Friday.
First Published: Oct 06 2024 | 11:52 PM IST
