Manufacturing growth slows down in December, HSBC PMI shows

Mumbai: The seasonally adjusted HSBC Purchasing Managers' Index (PMI-a headline index designed to measure the overall health of the manufacturing sector-posted 56.7 in December, slightly lower than November's reading of 58.4. The latest number pointed to a marked improvement of business conditions in the Indian manufacturing sector. While the rate of growth slowed, it remained above the long-run series average, according to data posted on the HSBC Markit website.

December data signalled a marked rise in incoming new business received by manufacturers in India. However, the latest expansion in new order volumes was slightly weaker than in the previous survey period. Growth of new business received from overseas markets also eased marginally at the end of 2010, but remained strong and comfortably above the historical trend.

Output increased substantially in December, which reflected sustained growth in overall new orders. However, backlogs of work increased for a ninth successive month. The rate at which outstanding business accumulated was weaker than in the previous survey period, but remained fast in the context of historical data. This suggested that pressures on operating capacity persisted as workloads continued to rise. In some cases, shortages of materials and labour compounded delays in production. Stocks of finished goods increased only slightly in December. Despite sustained expansions of new business and output, employment in the Indian manufacturing sector was unchanged during the month.

Purchasing activity at manufacturers in India continued to rise markedly during December. However, in line with slower growth of output, the increase in input buying eased. Nonetheless, delivery times lengthened again. Analysts opined that short supply and excess demand for materials had led to the deterioration in vendor performance. Stocks of purchases rose for the 22nd successive month in December as manufacturers continued to increase pre-production inventories.

The December data signalled a substantial rise in input prices faced by manufacturers in India. Input costs have increased in each month since April 2009, with the latest rate of inflation the strongest in eight months and notably sharp in the context of historical data. Output prices also rose markedly during the month and at the fastest pace since May.


November exports up by 26.5% at $18.8 billion

New Delhi: India's exports in November rose by 26.5% to $18.8 billion on a year-on-year basis, prompting the government to exude confidence that the outbound shipments will touch $215 billion this fiscal, reports PTI.

Exports in November 2009 stood at $14.9 billion.

Imports grew by 11.2% in November to $27.7 billion, while the trade imbalance in the month was $8.9 billion.

During the April-November 2010 period, outbound shipments were worth $140.2 billion compared to $110.6 billion in the year-ago period.

Commerce secretary Rahul Khullar has said that India's merchandise exports would be around $210-$215 billion in the current fiscal. Earlier, the government had fixed an export target of $200 billion during 2010-11.

Imports during the first eight months of this fiscal stood at $221.9 billion compared to $179 billion in the corresponding period last year. The trade deficit stood at $81.6 billion during April-November this fiscal.

Oil imports during November 2010 were valued at $7.7 billion, 2.31% higher than oil imports valued at $7.5 billion in the corresponding period last year.

Oil imports during April-November 2010 were valued at $64.8 billion, a rise of 21.4% over imports worth $53.4 billion in the year-ago period.

Non-oil imports during November 2010 stood at $20.07 billion, up 15.05% over $17.44 billion in November, 2009.

During the April- November period, non-oil imports stood at $157.11 billion, which was 25.04% higher than the level of such imports, valued at $125.64 billion in the same period last fiscal.

Exports sectors, which performed well during April-November period, include engineering goods, petroleum and refinery items and cotton yarn.


Godrej CFO: Brand takeover opportunities in India are limited

P Ganesh of Godrej Consumer Products, says few opportunities for inorganic growth in the country results in valuations being high. Godrej is looking for acquisitions at home and abroad that will be a strategic fit and accretive

In 2010 the fast-moving consumer goods (FMCG) sector grew and Indian companies undertook acquisitions overseas. But increasing input costs put pressure on margins. In an interview to Moneylife, P Ganesh, chief financial officer, Godrej Consumer Products Limited (GCPL), discussed these experiences from the year gone by and the possibility of price increases due to high oil prices. Excerpt from the interview.

Moneylife (ML): In 2010, we saw the Indian FMCG sector go overseas, with GCPL, and other firms like Marico, Dabur and Emami acquiring quite a few foreign brands, especially in Africa, South-East Asia and Turkey. Do you see more such acquisitions this year too?

P Ganesh (PG): Currently the focus is on integrating our recent acquisitions. However, we will definitely consider any opportunity if it is a strategic fit and is accretive, whether in India or overseas.

ML: When it is being said that India is the place to be, why go abroad for acquisitions?

PG: Inorganic growth opportunities are limited in India and with few opportunities valuations tend to be high at times. At GCPL, we look at EVA (economic value added) accretive acquisitions in the medium term (about two-three years timeframe).

ML: Apart from Genteel, which GCPL acquired recently, were you interested in any other Indian brands?

PG: Yes, we have been looking at opportunities both in India as well as abroad. But we have to consider whether the move will be a strategic fit.

ML: The soaps sector, which has been the stronghold for GCPL, has seen muted growth. What could be the possible reason?

Consolidated Godrej consumer growth has been excellent this year. However, our domestic soaps growth was impacted by the prevailing high food inflation as well as the correction in the pipeline stocks. Things are looking up now. The base effect will also help the growth number.

ML: What about hair colour, the other invincible Godrej segment? With so many new brands entering the market, has Godrej been affected?

PG: In hair colour, we are the market leaders. In this category, we have a range of offerings, including Godrej powder hair dye, Godrej expert powder and liquid hair colours, Renew and Nupur. Godrej has been one of the early pioneers in the hair colourants category. Providing unmatched quality at affordable pricing is the USP of our products. The industry is attracting a lot of attention from international players. We are currently not present in the high end of the category, say the top 10% of the market, where you'll find the likes of L'Oreal. Our products are in the Rs10 to Rs100 price band which itself has a lot of opportunities for growth.

ML: Almost all FMCG companies are feeling the pressure due to increased input cost and rise in cost of raw materials. Then, there is the issue of rising price of food items. How has GCPL handled cost increases?

PG: Vegetable oil prices globally have risen over the last few months, as have prices of other agricultural products. At GCPL, we are covered at reasonable prices for our requirements in the next three to four months. Food inflation has been a worry over the last few months. But with renewed attention on this front and prospects of a good winter crop, things should start easing over the next few months.

ML: So what do you expect in 2011?

PG: Given the high oil prices, we are seeing some upward price corrections. This will take care of the pressure on margins.


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