| Summary of Contents
| SHAREKHAN SPECIAL Q4FY2012 FMCG earnings review Key points -
Volume growth momentum sustained: Despite the sustenance of high food inflation, an uncertain macro environment and price increases in the product baskets, fast moving consumer goods (FMCG) companies witnessed a steady volume growth in Q4FY2012 (Hindustan Unilever Ltd [HUL]- 10%, Dabur- 10%, Marico- 13%, Colgate- 11%, Emami- 15% and Bajaj Corp- 20%). Innovations and renovation in product portfolios, increase in rural reach and improvement in rural penetration aided in maintaining the steady volume growth momentum. This along with higher sales realisation helped FMCG companies to maintain double-digit revenue growth in Q4FY2012. The acquisitions in the international market also helped companies such as Godrej Consumer Products Ltd (GCPL) and Marico to post robust revenue growth during the quarter. -
Lower CSD sales impacted some: Some of the FMCG companies like GSK Consumer Healthcare (GSK Consumer), Marico and Emami felt the impact of absence of sales from the canteen service department (CSD) in the months of February - March 2012. The CSD segment contributes around 8% and 7% to GSK Consumer and Emami's total turnover respectively. Marico's Saffola edible oil posted a muted sales volume growth of 3.3%, largely on account of lower sales from the CSD segment, which contributes around 15% to Saffola's sales volume. The companies are expecting it to be a one-time phenomena and expect CSD segment sales to improve in the subsequent quarters. -
Margin profile improved for most: Prices of commodities remained volatile during the quarter. Some companies witnessed a substantial drop in their raw material costs, thereby resulting in an improvement in their margins (as in the case of Marico and Tata Global Beverages). There were companies which witnessed stable gross margins while some saw an improvement in the same on account of a favourable revenue mix and price increases undertaken in the product portfolio during the quarter. Conversely, GSK Consumer and Dabur witnessed a significant drop in gross margins due to firm input prices for them. The companies that witnessed a significant improvement in their gross margins utilised the cost savings in brand building and promotional activites during the quarter (Marico, GCPL, Zydus Wellness and Bajaj Corp). -
ITC, HUL and GCPL outperformed: Q4FY2012 was yet another quarter where FMCG biggies like HUL and ITC beat our as well as the street's expectation by posting a strong bottom line growth. A strong operating performance and a higher 'other income' helped these companies post an above 25% growth in their bottom lines. Both the companies witnessed a strong improvement in their operating margins. HUL's domestic consumer business volume growth sustained at approximately 10%, while ITC's cigarette business sales volume growth stood at 5% during the quarter. ITC's non cigarette FMCG business was the highlight of the quarter with it posting an above 20% revenue growth and 75% year-on-year (Y-o-Y) decline in losses at the profit before interest and tax (PBIT) level. GCPL's Q4FY2012 consolidated results are in-line with our expectation with the adjusted profit after tax (PAT) before extraordinary items and minority interest growing by 26% YoY to Rs178.4 crore (in-line with our expectation of Rs180 crore for the quarter). This was mainly on account of a robust top line growth of above 30% and improvement in the operating margins. | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article. | | | | | |
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