Growth prospects for packaged consumer goods in Q1FY22 good, margins under pressure



Despite tough lockdowns in April and May amid the second wave of the coronavirus pandemic, packaged consumer goods manufacturers are expected to report decent numbers for the June quarter as the restrictions weren’t as tough this time around and due to the favorable base effect. Margins are likely to remain under pressure for underlying companies, broker Edelweiss said in a report on the consumer goods sector on Wednesday.

Major FMCG companies will announce their June quarter results. The results will provide insight into the impact of the second wave on consumer demand and business. Discretionary products and categories that rely on out-of-home consumption were hit by mobility restrictions.

While the supply chain impact was limited during the second wave compared to last year, rural India took a hit this time. This influence on demand has yet to be determined.

“In the first quarter of FY22, the first three weeks of April saw sustained growth momentum from the fourth quarter of the 21st quarter; as a result, Covid cases skyrocketed, making May a challenging month. However, the sector made a decent recovery in June. Year-over-year growth will still look good for most companies as the second wave didn’t come with any hard barriers, “their report said.

Almost all of the other categories are picking up and are likely to accelerate from Q2GY22, she added. The brokerage firm expects a revival of rural growth for FMCG businesses due to good monsoons and government crises.

On a two-year basis, the brokerage firm estimates that Q1FY22 revenue and EBITDA will increase 10.5% and 2.3%, respectively, over Q1FY20.

Companies also raised prices as inflationary pressures remain high. Edges, on. come under pressure yoy due to commodity inflation, she added

“Given inflationary commodity prices, we expect gross margins for most companies to decline year over year. Most companies have taken pricing measures to pass on some of the inflation, ”it said.

In a quarterly update on the stock exchanges last week, Mumbai-based Marico Ltd said the impact on business is less than it was in the first wave last year as supply chains are developed enough to allow localized and staggered lockdowns deal with. Overall demand has been trending better since early June, she added.

“The India business achieved sales growth of 30% plus, supported by robust double-digit volume growth,” said a July 2nd update.

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