Beating Street estimates, most fast moving consumer goods (FMCG) companies which’ve declared results so far for the quarter ended December 31, 2011, have reported a healthy top line (revenue) growth of 20-25 per cent.
Bottom line (profit) growth has also crossed 20 per cent for most during the period, data compiled by the Business Standard Research Bureau shows.
Analysts had earlier estimated top line growth to be 16-18 per cent and bottom line growth at 20 per cent for the quarter. Companies have clearly bucked the trend, stopping talk of slowing growth in at least this sector.
Adi Godrej, chairman, Godrej Group, says he never saw signs of slowing in the sector. “Consumer sentiment has been good. The stock markets, as well as the rupee, has been moving up. All of this will bode well in the coming quarters,” he says.
Dabur chief executive Sunil Duggal says, “There was anticipation of a slowing during the third quarter, but despite the price hikes, overall revenue growth has been good.”
On an average, companies saw volume growth of nine to 15 per cent and price-led growth in the region of five to 10 per cent during the quarter.
Clearly, a mix of volume and price appears to have perked numbers, analysts say. "Nobody estimated volume-growth to sustain during the third quarter. But it has," says Kaustubh Pawaskar, analyst at Mumbai-based brokerage Sharekhan.
For the October to December period, the Rs 75,000-crore Indian FMCG industry grew by about 10 per cent. While this is lower than the 13-14 per cent growth seen in previous quarters, analysts are hopeful about the 10 per cent growth sustaining into the fourth quarter, too.
They also expect margins to improve in the coming quarters, as commodity inflation begins to come off. In the third quarter, companies did see some pressure on their margins, thanks to higher ad spends and raw material costs. While Hindustan Unilever, Godrej Consumer and Colgate-Palmolive saw operating margins move up by a little over 100 basis points, others such as Dabur saw these decline during the quarter. However, both analysts and company executives say the worst is over on margin pressure. "Gross margins should improve in the fourth quarter," says Arnab Mitra, analyst at Mumbai-based brokerage IndiaInfoline.
Ad spends are also likely to be consistent in the fourth quarter, analysts say. In the third quarter, these were 10-12 per cent of sales, marginally lower than the 13-14 per cent of sales that companies had in the earlier quarters.
