 "FMCGs demand remains stable in Q1FY24, Marico calls out rural stress")
Fast-moving consumer goods companies said they saw demand remain stable in updates ahead of announcing their 2023-24 April-June quarter results.
Marico has called out rural stress in its update, while Godrej Consumer Products Limited (GCPL) said that in India, overall consumer demand has remained steady, as seen in the previous few quarters.
The maker of Cinthol soaps said in its update: “Our organic business continued to deliver robust performance with double-digit volume growth. This is in line with our strategy of volume-driven category development.”
It added that the performance was broad-based, with double-digit growth in homecare and higher than mid-single-digit volume growth in personal care.
Its sales growth was marginally higher than the mid-single digit, as it passed on the benefit of lower input costs to its consumers. It also said that its sales growth, including inorganic, was expected to be in the high-single-digit.
“At a consolidated level (organic), we expect to deliver high-single-digit volume growth, teens growth in constant currency terms translating into close to double-digit sales growth in rupee terms,” said GCPL.
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It said that its sales growth on a consolidated basis, inclusive of inorganic, would be in double digits.
“Our quality of profits has seen sustained improvement, led by robust gross margin expansion and ongoing category development investments. This should translate into strong earnings before interest, tax, depreciation, and amortisation growth,” it said.
In its international business, GCPL said its Indonesia business delivered steady performance on the back of structural changes implemented last year. It said its constant currency sales are expected to grow in the mid-teens.
“Godrej Africa, US, and Middle East continued to deliver consistent performance, with constant currency sales growth in mid-teens. However, in rupee terms, there was an adverse currency translation impact, resulting in high-single-digit sales growth,” said GCPL.
“We expect to have an exceptional stamp duty expense on slump-sale transaction of Park Avenue and KamaSutra brand acquisition,” it added.
Marico, on the other hand, said that demand trends in the sector remained stable during the quarter that ended in June, but also said that signs of improvement on a sequential basis were not visible.
“While urban markets were steady, the anticipated pick-up in rural demand remained elusive. Moderating headline inflation, hike in minimum support price, easing liquidity pressures, and forecast of a near-normal monsoon continue to fuel hopes of a gradual recovery in rural demand in the year,” said the maker of Parachute coconut oil in its quarterly update.
Marico’s domestic business was affected by significant trade restocking in Saffola edible oils in reaction to the sharp fall in vegetable oil prices and channel inventory adjustments in core portfolios triggered by the last leg of trade scheme rationalisation for correction of the historical first-quarter revenue skew, it said.
Its domestic volume grew in low-single digits with a minor drop in Parachute coconut oil. It also witnessed low double-digit volume growth in Saffola edible oils and a flat quarter for value-added hair oils.
“Among the newer portfolios, food continued its strong run, while premium personal care (including digital-first portfolio) remained steady,” the company said.
However, Marico said it expected a visible pick-up from the coming quarter, given the sustained healthy trends in offtake, market share, and penetration across its key franchises.
Marico’s consolidated revenue in the quarter declined in low-single digits on a year-on-year (YoY) basis, which was dragged by pricing interventions in key domestic portfolios last year and further pricing drops in Saffola edible oils (amounting to a pricing decline of 30 per cent YoY) during the quarter.
The company’s international business maintained its healthy growth momentum as it delivered high single-digit constant currency growth during the quarter ended June, with most geographies exhibiting resilience in a volatile global operating environment, it said.
On the commodity cost front, copra prices stayed in a favourable zone, edible oil prices declined sharply, and crude oil derivatives remained firm, said Marico.
“Gross margin is expected to expand materially YoY as well as on a sequential basis. Advertising and promotion spending continued to trend upwards in line with the company’s focus on strategic brand building of core and new categories,” the company said.
It said that expansion in operating margin was expected to drive double-digit growth in the bottom line.
“The business has exhibited a healthy margin upside, and as indicated above, the company remains confident of resuming an upward trajectory across key growth parameters from here on out,” said Marico.
Marico said that the company maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term, enabled by strengthening brand equity of its core franchises and scale-up of new engines of growth.
RURAL DEMAND REMAINS ELUSIVE
- Marico says urban markets were steady, but the anticipated pick-up in rural demand remains elusive
- Marico’s domestic business affected by significant trade restocking in Saffola edible oils in reaction to the sharp fall in vegetable oil prices and channel inventory adjustments in core portfolios triggered by the last leg of trade scheme rationalisation for correction of the historical Q1 revenue skew
- Godrej Consumer Products says in India, overall consumer demand remains steady, as seen in the previous few quarters
- Godrej Consumer Products’ organic business continues to deliver robust performance with double-digit volume growth. This is in line with the company’s strategy of volume-driven category development