Two of the top three domestic FMCG (fast moving consumer goods) companies reported strong volume growth in fourth quarter results even as a few saw margin pressure in spite of softening raw material prices. This marks a positive development for the economy, which has seen growth rate decelerate with inflation hitting demand and tighter monetary policy stopping firms from opening their purse for investment.
The positive movement in volume growth seen at the top firms in the FMCG sector, a bellwether for consumer sentiment in the country, comes in contrast to poor indicators in the discretionary spends with automobile sales declining for the first time in a decade.
However, Hindustan Unilever, the Indian arm of the world’s second largest FMCG firm, revealed a positive undercurrent on Monday with higher sequential volume growth in the fourth quarter ended March 31, 2013. It also surprised the markets with better-than-expected profit growth.
On Tuesday, the top three Indian FMCG firms came out with their results. Interestingly, all of them have seen private equity investments in the past one year. Here’s a snapshot of how they performed.
Godrej Consumer: Sales up 29.7%, profit shoots with one-time gain, Vivek Gambhir promoted as MD
The firm, which attracted Singapore’s sovereign wealth fund Temasek to invest last year, clocked strong net sales growth of 29.7 per cent that rose to Rs 1,719 crore for the quarter over the year-ago period, supported by 23 per cent growth organically in international markets like Africa, Latin America and Europe.
Due to favourable input prices and aggressive product launches, Godrej Consumer reported 73 per cent increase in net profit to Rs 334 crore for the quarter ended March 31, 2013, over the year-ago period. This was largely due to one-time gain coming from the sale of Indonesian non-core food business. But excluding that, profit grew by just 6.7 per cent over Q4 FY12.
GCPL chairman Adi Godrej said, “Our sales growth remains healthy and we continue to carry forward the strong momentum from the earlier quarters. Over the past few quarters, we have had several major launches, which have been backed with strong marketing investments. Our EBITDA growth has been lower than the sales growth during this quarter on the back of high marketing investments for the new launches.”
He further said that these launches would scale up in subsequent quarters and the company would see further improvement in the bottom line.
The top management, too, saw a shuffle. Nisaba Godrej (daughter of Adi Godrej), who is currently a non-executive director on the board, has been appointed as an executive director with effect from July 1, 2013.
Moreover, Vivek Gambhir will take over as the new managing director of the company in July. He was earlier the chief strategy officer for Godrej Industries. Gambhir will take over from A Mahendran, who will cease to be the managing director but will continue as a non-executive director.
Dabur: Sales up 12%, profit grows 17.6%
Aided by volume growth of 12.3 per cent, the highest in the last 11 quarters, Dabur India Ltd saw double digit net sales growth to Rs 1,531 crore for the fourth quarter ended March 31, 2013, over the year-ago period. The main trigger behind the rise in net sales is the steady domestic FMCG growth of 15.1 per cent year on year and the organic growth of the international business.
The company’s net profit rose faster and was up 17.6 per cent to close at Rs 200.5 crore for the quarter. This showed margin expansion for the firm as material costs were lower at 48.3 per cent of sales in Q4 FY13, as against 50.2 per cent in Q4 FY12.
Gautam Sinha Roy, vice-president (equities) at Motilal Oswal Securities Ltd, said, “Dabur’s numbers were above expectations on most fronts, aided by strong domestic volume growth, as well as easing commodity prices driving the higher-than-expected expansion in operating margin.”
For the full FY 13, net sales of the company crossed Rs 6,000 mark, growing 16.3 per cent to Rs 6,146.4 crore. The company attributed this to volume growth, some price increase and currency translation gains.
For FY13, the domestic business contributed 31 per cent of sales which included consumer care and foods. And the remaining, over two-thirds of sales, came from international markets. Consumer care continues to be the biggest vertical for Dabur, followed by food and the rest. Also, Baring Private Equity India has recently built some stake in the company.
Marico: Sales up 8.3%, profit boosted by one-time gain
Marico reported less-than-spectacular results for the fourth quarter. The firm, which saw another sovereign wealth fund of Singapore GIC invest in it, along with Baring Private Equity India last year, reported lower-than-expected 8.3 per cent growth in revenues to Rs 998.6 crore during Q4 FY13, over the previous year.
The consolidated net profit grew 20 per cent to Rs 84 crore, largely due to a one-time gain of around Rs 33 crore.
The company’s operational performance was also below expectations during the quarter, with operating margins declining over the corresponding period the previous year.
(Edited by Sanghamitra Mandal)