Higher input costs affects FMCG margins in Q2 despite rising sales
Moneylife Digital Team 09 November 2011

While HUL and Marico witnessed increased profits, others show poor profit growth

Fast moving consumer goods (FMCG) companies seem to be struggling under increased input cost burden. Only two among the companies that have declared their results so far - Hindustan Unilever (HUL) and Marico—seem to have avoided the predicament of rising sales and poor profit growth.

During the September quarter, most FMCG companies have reported higher sales but their profit growth remained in single digits or even lower than same quarter last year. Godrej Consumer Products (GCPL) reported a jump in sales of 23% while Colgate Palmolive’s revenues rose 19%, but those high sales figures did not translate into profits. GCPL’s operating profit for the second quarter stood at Rs138.13 crore, a mere 4% increase from the corresponding period last year. Colgate Palmolive was worse; with a mere 1% increase to Rs130.79 crore from Rs129.66 crore a year ago. For the same period, Dabur’s operating profit grew at 6% to Rs174.10 crore from Rs164.26 crore, though its sales grew 10% to Rs880.82 crore from Rs800.25 crore in September 2010.

Gillette has been the worst performer in this category, though the sudden collapse in profits may be attributed to a one-time issue. Despite a sales growth of 13% from September 2010 to September 2011, the company’s operating profit plunged 58%, to Rs25.58 crore from Rs60.47 crore. During the second quarter, Emami’s operating profits went down 9% to Rs54.72 crore from Rs59.84 crore a year ago.

Of the two excellent performers, Marico reported an operating profit of Rs96.40 crore up from Rs66.94 crore last September, a remarkable rise of 44%. HUL’s profits grew 28% to Rs 823.82 crore from Rs 641.47 crore in September last year. Sales growth of HUL in the September quarter was 18% while and Marico’s sales, for the same period, jumped 34% from Rs537.11 crores to Rs 718.34 crore.

HUL’s success has been attributed to strong volume growth. As for Marico, though the price of copra, the required raw material for its flagship brand Parachute coconut oil has gone up, Marico doesn’t plan any major hikes. Experts believe that next quarter, it may suffer a slowdown.

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