FMCG revenues to rise in Q2, but costs could dent margins

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ET Intelligence Group: FMCG companies are expected to deliver double-digit revenue growth for the September quarter, driven by a combination of volume gains and calibrated price increase. However, rising costs of raw materials, including sugar, edible oils, packaging materials and freight, are likely to keep gross margins under pressure across the sector, limiting profitability despite steady demand trends and improving rural consumption.

Hindustan Unilever (HUL) is expected to post low double-digit revenue growth supported by the home care, and beauty and wellbeing segments, while personal care and foods are expected to see steady growth. However, inflation in edible oils, packaging materials and food commodities is likely to weigh on gross margins despite pricing actions and operating leverage. Key monitorables include rural and urban demand trends, and raw material inflation.

FMCG revenues to rise in Q2, but costs could dent margins<br>

Nestle India is expected to deliver another strong quarter, with revenue growth of around 20% driven by healthy volume expansion and sustained demand across key categories. Growth is likely to be led by confectionery and beverages, supported by premiumisation and quick commerce channels. Cost efficiencies and operating leverage are expected to boost margins despite inflation in inputs. Key monitorables include demand trends across urban and rural markets, raw material costs and competitive intensity.

Asian Paints is expected to post a double-digit revenue growth in the September quarter, supported by mid-single-digit volume growth in its decorative paints business and the benefit of better pricing. However, margins are likely to remain under pressure due to inflation in crude-linked raw materials, packaging and freight costs. Going ahead, demand trends need to be monitored, as consumption remains soft across key markets.

Britannia Industries is expected to deliver a strong double-digit revenue growth in the September quarter. While inflation in key commodities such as sugar and other raw materials is expected to pressure gross margins, the impact on profitability is likely to be partly mitigated by sourcing efficiencies and operating leverage. However, elevated employee costs and higher advertising spends may continue to weigh on overall margins. Key monitorables inlude demand trends across urban and rural markets and input cost inflation.

Colgate-Palmolive India's likely double-digit revenue growth is expected to be driven by strong volume expansion, pricing gains and premiumisation, supported by a favourable base, stronger execution and investments in premium brands and new launches. Dabur India's revenue growth is expected to be driven by strong momentum in its domestic business, particularly in home and personal care and food & beverages. Demand trends, rural expansion, international performance and the impact of geopolitical and commodity-related uncertainties are key monitorables.

Varun Beverages is likely to deliver a strong quarter, with revenue growth of over 20% driven by robust domestic demand, healthy volume expansion and continued traction in international markets. Growth could be supported by expanded capacities, an extended summer season and stronger penetration across geographies.