In the last few weeks, a slew of FMCG companies announced their Q3 (Oct-Dec) earnings for FY20. Most FMCG companies reported net profit in the third quarter.
However, as per management commentary from companies, they are still grappling with liquidity constraints. Here is a low-down on major FMCG corporate results.
The overall trends suggest moderate sales revenue growth ranging from 2.6 percent to 11 percent while the profits have grown in double-digits for all.
The cut in corporate tax in September 2019 has had an impact on surging the profit margins. This should help in trickle-down effect of FMCG reviving investment cycle from higher profits, said an analyst from a brokerage firm.
Hindustan Unilever
FMCG major Hindustan Unilever (HUL), reported a double digit profit growth in the October-December quarter at 11.9 percent year-on-year to Rs 1,616 crore, driven by lower commodity cost mainly.
Revenue increased 2.6 percent to Rs 9,808 crore, while domestic consumer growth was 4 percent with underlying volume growth at 5 percent.
HUL expects the overall market in the near term to remain challenging led by high retail inflation, liquidity issues, and lower GDP estimate.
The consumption in discretionary categories remained more impacted than food categories.
According to Motilal Oswal Financial Services, HUL has been a stellar performer over the past decade, both in earnings (around 13 percent CAGR) and stock price which climbed 884 percent.
Also, it has significantly outperformed some of its largecap consumer peers over the same period.
ITC
Cigarettes-hotels-to-FMCG major ITC recorded huge 29.07 percent year-on-year growth in Q3FY20 profit, beating analyst expectations.
Profit for the quarter stood at Rs 4,141.9 crore, increased from Rs 3,209.1 crore in the corresponding period last fiscal as tax expenses fell 44.6 percent YoY due to cut in corporate tax rate by the government last year.
Revenue growth was 5.1 percent YoY at Rs 12,103 crore for the quarter. Of this, cigarette business contributed 44 percent to total revenue, increased 4.7 percent YoY to Rs 5,310.98 crore with EBIT rising 5.6 percent to Rs 3,755.97 crore, while revenue from FMCG and others grew by 3.5 percent to Rs 3,312.32 crore with EBIT growing 40.4 percent to Rs 107.62 crore in Q3FY20 YoY.
All verticals, which include cigarettes, other FMCG offerings (branded packaged foods, apparel, education and stationery, personal care, matches and incense sticks), hotels business, paperboards, paper, and packaging, as well as agribusiness reported an increase in turnover.
In terms of profit before tax (PBT), all the verticals also reported an increase in numbers.
Brokerage houses believe that the sales volume will be affected with the cigarette price hike in the budget.
"If the cess on cigarettes is increased it would affect sales volumes of ITC’s cigarette business as the company will pass on the increase in rate to consumers through price hikes," KR Choksey had said in its Budget expectations report.
Marico
On January 30, Marico reported a nearly 10 percent increase in consolidated net profit to Rs 276 crore for the quarter ended December 2019 driven by gross margin expansions as against a net profit of Rs 251 crore in the October-December quarter a year ago.
However, net sales dropped by 1.98 percent to Rs 1,824 crore during the quarter under review compared to Rs 1,861 crore in the corresponding quarter of the previous fiscal.
Dabur
Dabur India posted in-line numbers for the quarter ended December 2019 (Q3FY20) with consolidated net profit rising 8.9 percent at Rs 400 crore as compared to a profit of Rs 367.2 crore in the same quarter last fiscal.
The consolidated sales grew 7 percent YoY mainly led by an international business (12 percent constant-currency growth). The domestic business, which constitutes 71 percent of sales, grew by 5.6 percent entirely on the back of a 5.6 percent volume growth. Excluding the food business, volume growth was 7 percent.
Earnings before interest, tax, depreciation and amortization (EBITDA) jumped 10.7 percent at Rs 493 crore versus Rs 445.4 crore and the margin was at 21 percent versus 20.3 percent.
In contrast to the industry trends, rural demand growth was 4 percentage points ahead of urban demand growth because of Dabur’s improving distribution reach in the hinterland.
According to brokerage houses, weaker rural consumption growth and category headwinds for juices remain the factors to watch.
The foods segment (12.5 percent of sales) remains the key laggard with a sales decline of 2 percent. As per Nielsen, the juices and nectar category saw volumes shrinking 11.6 percent in Q3 as consumers moved to lower-priced alternatives such as dairy-based drinks and carbonated drinks. However, the company seems to be gaining market share in this declining category.
Godrej Consumer
FMCG major Godrej Consumer Products Ltd (GCPL) on January 29 reported a 5.11 percent increase in consolidated net profit at Rs 445.20 crore in the third quarter ended December, helped by volume growth in domestic business as compared to net profit of Rs 423.52 crore in October-December quarter a year ago.
The company’s Q3 net profit jumped 38.4 percent to Rs 473 crore as against Rs 341.8 crore for same period last fiscal. Revenue rose 8.7 percent to Rs 3,149.3 crore versus Rs 2,897.3 crore, YoY.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 23.1 percent at Rs 677.9 crore against Rs 550.6 crore and EBITDA margin was up 250 bps at 21.5 percent versus 19 percent, YoY.
The company board recommended a final dividend for the year 2019 of Rs 61 per equity shares of Rs 10 each.
Britannia
Britannia Industries on February 7 reported a 23.26 percent year-on-year (YoY) rise in its consolidated net profit to Rs 369.9 crore for the December quarter of the financial year 2020 against Rs 300.10 crore reported in the corresponding quarter of the previous financial year.
Britannia’s December quarter consolidated sales growth decelerated considerably. It grew by 5 percent YoY (year on year) compared to 6 percent in Q2 FY20 and 11 percent in Q3 FY19.
Volume growth of 2 percent in Q3 FY20 compared to 3 percent in H1 FY20 signifies a worsening of the demand slowdown. Slowdown in demand was predominantly seen in rural areas which contribute to 20 percent of sales.
Brokerage houses believe that overall, the quarterly result were weaker than already lowered expectations and signals that consumption recovery would be gradual at best.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
