FMCG cos to record weak Q3 report cards as demonetisation woes underweigh

From the FMCG firms’ Q3 results ending December 2016, it’s evident that demonetisation has hit the Rs 2.5-lakh-crore FMCG market by a nearly 1.5 per cent of net sales

e4m by exchange4media Staff
Updated: Feb 6, 2017 8:16 AM
FMCG cos to record weak Q3 report cards as demonetisation woes underweigh

It’s evident that demonetization has hit the FMCG sector from the Q3 results of the firms. The companies registered a fall in both sales and profit with the effects of the government withdrawing high currency notes coming into place. According to global performance management company Nielsen, the Rs 2.5-lakh-crore FMCG market could take a hit of nearly 1.5 per cent of net sales, which works out to Rs 3,840 crore, as per reports.

Homegrown FMCG major Dabur India reported a decline of 7.5 per cent in consolidated net profit at Rs 294 crore for the third quarter ended December 31, 2016 on currency fluctuations woes, from Rs 318 crore a year ago. Consolidated sales dipped to Rs 1,848 crore during the December quarter from Rs 1,967 crore in corresponding quarter last fiscal.

Hindustan Unilever (HUL) saw a net profit of Rs 1038 crore in October-December quarter, a seven per cent jump from Rs 971 crore in corresponding quarter last fiscal. According to media reports, it recorded an exceptional profit on sale of surplus properties of Rs 159 crore and restructuring expenses of Rs 6 crore. However, its two important segments, home care and personal care, had an unsteady performance. While home care revenues inched up a per cent to Rs 2,689 crore, personal care slipped three per cent to Rs 3,980 crore. Double-digit growth in Surf, as well as home care liquids triggered growth in the home care segment. Price hikes in the personal wash (Dove, Lux and Lifebuoy) segments amid rising input costs, coupled with low demand due to demonetisation, impacted this segment’s performance. Then it saw sales volume fall by four per cent for the December quarter.

Refreshments segment, which comprises brands such as Taj Mahal, Red Label, Taaza, Bru, Kwality Walls ice cream, amongst others, witnessed the highest revenue growth of eight per cent in the quarter to Rs 1,164 crore.

On the other hand, Godrej Consumer Products (GCPL) registered a 4 per cent drop in its consolidated net profit at Rs 352 crore in the same quarter, as compared to Rs 368 crore in the corresponding quarter last year, according to the company’s stock exchange filing. This can be attributed to a substantial rise in costs. But interestingly enough, the India business of the company recorded a net profit rise of 19 per cent to Rs231 crore on sales of Rs 1,263 crore for the December quarter. In their statement, the firm has mentioned that, given the current scenario it has managed to outperform the overall market with secondary sales growth of 2 per cent during the quarter.

One of the largest consumer goods company Procter & Gamble (P&G) has already signalled couple of weeks back that its weak sales growth for the OND quarter was on account of the note ban in India. The December quarter numbers of its listed India companies — P&G Hygiene and Health Care and Gillette — will come out on February 7.

Even Asian Paints which has so far been recording double-digit volume growth for past four consecutive quarters got hit by note ban as its domestic decorative business saw low single digit growth in the 2-3 per cent range. According to media reports consolidated net profit witnessed a sluggish growth of 1.5 per cent year-on-year (y-o-y) to Rs 489.31 crore in the December quarter, while total income from operations rose 2.56 per cent y-o-y to Rs 4,353.99 crore. In the same quarter last fiscal, Asian Paints went past others and reported a nearly 26 per cent growth in net profit.

ITC Ltd also reported single digit growth of 5.7 per cent in net profit to Rs 2,647 crore for the third quarter ending December 31, 2016, while total income from operations grew by 4.7 per cent at Rs 13,570 crore. In the previous fiscal it had posted a net profit of Rs 2,503 crore and net income of Rs 12,962 crore. Revenue from the FMCG business, including cigarettes, was reported to increase by 2.51 per cent to Rs 10,857 crore, from Rs 10,591.22 crore in the same quarter a year ago. ITC mentioned in a statement that its FMCG sales were adversely impacted due to ‘lower consumer off-take and reduction in trade pipelines’, particularly after the government’s announcement to withdraw high denomination currency notes. The impact was felt across all operating segments, more acutely on the sales of biscuits, snacks, noodles, personal care products and branded apparel in the initial phase.

For other FMCG players Jyothy Labratories reported 6.6 per cent increase in net profit at Rs 21.5 crore for the same quarter ending 2016, compared to Rs 20 crore in the same period last fiscal. Net sales during the quarter under review stood at Rs 399.5 crore as against Rs 388 crore in the same period previous fiscal, up 3 per cent. On the other hand, FMCG sector saw a silver lining with Bajaj Corp posting net profit growth of 17.2 per cent for December 2016 quarter at Rs 58 crore, compared with Rs 49 crore in the same period last year. However, net sales of the company increased reported to slip 4.75 per cent to Rs 186 crore during Oct-December quarter. It had reported net sales of Rs 196 crore in the same quarter last year.

It’s evident that the FMCG sector continues to be in a flux with the liquidity crunch as retailers have held back on procuring new stock and suppliers are constrained by available credit, according to media reports.

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