March 12, 2017

Analysis: Food products growth of FMCG cos outpaced non-food segments in Apr-Dec 2016-17

An analytical story I wrote a few days back (in the news organisation I work for) on food products growth of FMCG cos outpacing non-food segments Apr-Dec2016-17

[C] Foods business drives growth of FMCG cos in Apr-Dec
Cogencis, Wednesday, Mar8
By Rajesh Gajra
NEW DELHI -  The foods products segment in the fast moving consumer goods industry is showing better revenue and net profit growth rates in Apr-Dec compared to the non-food products. The growth rates in operating margins of the two product categories, however, rose equally but marginally.
Among eight FMCG companies, forming a part of the sector's benchmark index, Nifty FMCG, the aggregate foods revenues grew 6.3% on year in Apr-Dec while the aggregate earnings before interest and tax went up by 7.7%, an analysis of data from Cogencis Corporate Fundamental Database showed.
On the other hand, the non-food segment recorded on-year aggregate revenue and EBIT growth of 2.2% and 3.1% respectively.
The foods segment's collective EBIT margin for the Apr-Dec period went up to 11.5% from 11.30% a year ago, while the non-food businesses recorded a collective EBIT of 18.7% up marginally from 18.5%.
Besides Hindustan Unilever Ltd and Dabur India Ltd which operate in food and non-food businesses, the analyis encompassed companies which operated purely in food products segment such as Britannia Industries, Jubilant Foodworks India and Tata Global Beverages Ltd or which were non-food FMCG companies such as Colgate-Palmolive (India) Ltd, Godrej Consumer Products Ltd and Emami Ltd.
ITC Ltd, the largest listed FMCG company by market capitalisation, could not be covered in the analysis since the company did not disclose the numbers of its foods business separately.
"The foods business of FMCG companies has seen stable growth compared to personal care products where the growth, though present, has deteriorated a bit," said Ajay Thakur, analyst--consumer at Anand Rathi Broking.
In the wake of demonitisation-induced liquidity squeeze during the Oct-Dec quarter consumers deferred their purchases of personal care and home care products but food products such as edible oils continued to be purchased as before, said Thakur.
Hindustan Unilever's EBIT from its foods and refreshments business grew by 6.4% on year to 43.77 bln rupees in Apr-Dec which represented better growth than the 2.2% on-year rise seen in its non-food products revenues of 211.89 bln rupees.
The Apr-Dec revenues of HUL from its foods and refreshments segments rose 6.4% on year to 43.77 bln rupees while the growth in non-food segments was less than 1% at .
In the Oct-Dec quarter HUL’s refreshment segment’s strong growth of 8.1% on year was led by its tea brands and its ice cream segment, according to a recent research note by ICICI Securities.
The personal care segment of HUL declined 2.7% on year during the quarter led by personal wash category which witnessed price hikes amid a tough environment to curb the impact of rising input cost, the research note said.
HUL’s EBIT margin in foods and refreshments stayed flat on year at 13.5% in Apr-Dec while the collective non-food business’ EBIT increased marginally to 17.5% from 17.3% in the year ago period.
Among other FMCG companies (see table below)in the analysis, Britannia Industries, a food products-only company, registered on-year growth rates of 8.7% and 4.9% in its revenues and EBIT in Apr-Dec. On the other hand, Emami Ltd, a non-food products FMCG company, recorded a EBIT growth of 4.1% on year on the back of a 9.1% on-year rise in revenues.
In the case of Tata Global Beverages and Godrej Consumer Products, the former, a food products-only FMCG company, logged a higher growth rate of 28.7% on year in its EBIT in Apr-Dec while for the latter, a non-foods FMCG major, EBIT grew by 13.6% on year.
Analysts said while the demonitisation effect was not acutely felt by many FMCG companies the current sluggishness in non-foods business is likely to continue for a few more quarters and last till the Jul-Sep quarter of 2017-18 (Apr-Mar).

The table below shows the on-year growth in revenues and earnings before interest and tax of eight major FMCG companies in Apr-Dec




On-year change (in per cent)

Colgate-P India
Jubilant Foodworks
Tata Global
Godrej Consumer
Hindustan Unilever


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