FMCG sector expects single-digit revenue growth, margin improvements in June quarter

New Delhi: Fast-moving consumer goods companies expect single-digit volume growth along with expansion in margins during the April-June quarter of this fiscal, helped by a revival in rural demand and a stable urban market.

Listed FMCG companies such as Dabur, Marico and Adani Wilmar in their latest quarterly updates have reported a "gradual improvement" in demand trends in the April-June quarter, which was on the expected lines.

Home-grown FMCG maker Dabur expects to register mid to high single-digit growth in its consolidated revenue, supported by mid-single-digit volume growth in the domestic market.

Marico said its consolidated revenue grew in high single digits in the June quarter, while the domestic business posted a "modest uptick in underlying volume growth" on a sequential basis.

Adani Wilmar, which sells edible oils and has some play in the food products under Fortune brands, has also reported an overall 13 per cent volume growth in the June quarter.

Its food and FMCG business volumes grew by 23 per cent year-on-year, said Adani Wilmar.

About margins, the makers expect expansion on a year-on-year basis helped by factors such as benign commodity prices and cost-saving initiatives.

"Commodity prices were stable during the quarter," said Dabur, adding, "Gross margins are likely to witness some expansion on account of rollover price increases and cost-saving initiatives."

Marico, which owns brands such as Saffola, Parachute, Hair & Care, Nihar and Livon, among others, also expects gross margin to expand on a year-on-year basis.

Among key inputs, copra prices stayed firm in line with forecasts, while edible oil and crude oil derivatives remained range-bound.

"Operating profit is expected to grow slightly ahead of revenue leading to a marginal inching up of operating margin on a year-on-year basis," it said.

About rural market sales, Dabur said in the June quarter Dabur saw sequential improvement in demand trends with growth picking up from those regions.

"With a forecast of a normal monsoon and continued focus by the government on macroeconomic growth, we expect the improvement to accelerate in the coming months," said Dabur which owns brands such as Dabur Chyawanprash, Dabur Honey, Dabur PudinHara, Dabur Lal Tail, Dabur Amla, Dabur Red Paste, Real and Vatika.

According to Abneesh Roy -Executive Director (Research) at Nuvama Institutional Equities, volume growth is likely to be in low-to-mid-single-digit, largely due to heatwave, general elections and fewer marriage days.

"Rural demand continues to see gradual but slight green shoots as real rural wages remain muted," he said.

Both Dabur and Marico reported an increase in their international businesses.

Mariwala family promoted Marico said its international business is expected to post a "strong growth" in constant currency terms. However, severe currency depreciation in Turkey and Egypt continued to have an impact on translated growth.

Dabur said its international business "delivered double-digit constant currency growth", driven by a resilient and broad-based growth across markets.

Last week, Crisil Ratings in a report projected a revenue growth of 7-9 per cent for FMCG players during this fiscal, supported by higher volume growth due to a revival in rural demand and a steady demand from urban areas.