Three of the major FMCG companies in India -- Nestle, Britannia and HUL -- may break entire consumer goods sector's slump.
Three of the major FMCG companies in India — Nestle, Britannia and HUL — may break entire consumer goods sector’s slump. Even as consumer goods sector is expected to report 4-10% decline in revenues owing to lockdown, Hindustan Unilever, Britannia and Nestle are likely to report 6-10%
earnings growth led by reduced tax outgo, an Emkay research report said. In fact, while the stock markets have suffered worst crash in the recent times, HUL and Nestle share prices have not only stayed safe, but have made new highs.
While the consumer goods sector has been complaining of a prolonged slowdown for over a year now, the current situation does not bode any better for the companies. Due to the coronavirus lockdown, the sector may lose revenues to the tune of double digits, according to a report. “We estimate a 4%-10% decline in revenues across the consumer goods sector in Q4 (versus low mid-single-digit growth in Q3) on account of the lockdown in March,” the report said. While sales growth was already low in January-February, the loss of sales for about 10 days in March will further hit revenues, the report added. The lockdown extension for 19 more days may also add to the pain of consumer goods companies.
For the retail sector, some categories may have seen increased sales as customers stocked up in the fear of running out of goods. However, since primary sales have been low due to plant shutdowns and trade disruptions, that may have balanced the scales. Unilever, one of the largest FMCG companies in the world, also recently said that while sales have gone up for categories such as home and hygiene products, the out of home consumption has totally fallen.
“The impact of coronavirus and consequent Janta Curfew and lockdown, has been witnessed on both the supply chain and consumer goods manufacturing. The outlook for FY21 is also weak, with GDP decline likely for the year,” another research report by Motilal Oswal said. Meanwhile, the government has extended the lockdown for 19 more days and has also issued a directive for businesses dealing in essential goods to maintain supply and production. In its directive, it has also allowed ecommerce companies to deliver essential goods.