Weak demand to weigh on FMCG Q3 | The Financial Express

Weak demand to weigh on FMCG Q3

On an overall basis for the staples segment, analysts expect gross margins to improve sequentially, with softening of select raw material prices—primarily crude and edible oils may result in a modest recovery in Ebitda (earnings before interest, tax, depreciation and amortisation) margins too.

Weak demand to weigh on FMCG Q3
FMCG major Dabur India said on Friday it expects a "low to mid single- digit revenue growth" for the quarter. (File)

Commentary of a weak demand coming in from fast moving consumer goods for the third quarter ended December 31 suggests rural markets continue to remain under pressure. FMCG major Dabur India said on Friday it expects a “low to mid single- digit revenue growth” for the quarter.

“On account of challenging macro-economic environment and muted category growths in the quarter, Dabur’s India business is expected to report low to mid-single digit revenue growth… demand trends for the industry remained weak during Q3FY23 with rural markets continuing to remain under pressure,” the company said in the business update for the October-December quarter.

The company said its healthcare portfolio returned to positive growth trajectory, still navigating high bases of the pandemic. Food and beverage (F&B) business continues to trend at robust levels. During the quarter, F&B’s growth will see some moderation on account of early onset of the festive season.

However, with inflation starting to cool off, the gross margins will be slightly better sequentially. “The adverse currency movements in international business and inflation will lead to near term impact on operating margin, which is expected to be lower by 200-250 basis points versus Q3FY22,” the company said.

Biscuits manufacturer Parle also highlighted a muted volume growth in the rural markets at 2-3%, which lagged behind urban volume growth of 7-8% during the quarter. The company said that the biscuit industry grew 4-5% in volumes in Q3, while the value growth rate came in at 8-10%. However, with some signs of recovery in the rural market, the company said the volume growth in the month of December was at 4-5%, while the total raw material cost was lower by 1-2% year-on-year during the third quarter.

Earlier in the week, Marico also said highlighted that the recovery in rural demand remained muted. “Urban and premium categories maintained their steady pace of growth. However, recovery in rural demand was not as discernible as retail inflation stayed at elevated levels,” the make of Parachute hair oil said in the business update for the December-ended quarter.

“During the quarter, the Indian FMCG sector witnessed slow growth driven by poor rural consumption and a slowdown post the festive season,” said Godrej Consumer Products (GCPL) in its business for the third quarter. However, the Godrej Group company said that despite the demand softness in India, it expects to deliver double-digit sales growth backed by low single-digit volume growth.

On an overall basis for the staples segment, analysts expect gross margins to improve sequentially, with softening of select raw material prices—primarily crude and edible oils may result in a modest recovery in Ebitda (earnings before interest, tax, depreciation and amortisation) margins too.

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First published on: 07-01-2023 at 07:16 IST