Result preview: FMCG revenue, volume likely to log modest rise in Q2

Rural may outpace urban; rain plays spoilsport for out-of-home consumption, beverages: Analysts

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 products 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.

Analysts at the brokerage, which tracks firms like Hindustan Unilever, Nestle, Dabur, Marico and Britannia, among others, said companies are expected to “report a revenue and volume growth of 5.7 per cent year-on-year (Y-o-Y) and 5.5 per cent Y-o-Y, respectively, in Q2 FY25E 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 demand trends for staple companies remained stable quarter-on-quarter (Q-o-Q) in Q2 FY25, with rural markets outperforming urban for the third consecutive quarter. 

“However, heavy rain and floods in certain regions have disrupted the supply chain. They also affected out-of-home consumption and consumer offtake, particularly for the beverages category,” they said in note.

They added that, “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. Quick service restaurant (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 while demand trends were improving, heavy rain and floods across the country impacted out-of-home consumption and consumer offtake during the quarter. This especially impacted its beverage business. 

The company is expected to post a mid single-digit decline in consolidated revenues during the quarter, also due to a distributor inventory correction exercise it undertook.

Marico, the maker of Parachute hair oil, said in an exchange filing that the sector witnessed stable demand trends with rural outperforming urban on a Y-o-Y 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.

Value-added hair oils have remained subdued amid 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 better results in the quarter. 

“The company delivered another strong quarter with double-digit revenue growth of 16 per cent Y-o-Y. This was driven by strong execution in both edible oils and food business. We are seeing growth in the food business across various categories and regions throughout the country,” it said in an exchange filing on Friday.