Home Food Pre-GST sales impact subdue FMCG cos performance in Q1: Experts

Pre-GST sales impact subdue FMCG cos performance in Q1: Experts

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Top FMCG players, including , , and would have performed much better in first quarter had sales not been impacted by de-stocking ahead of GST implementation, according to industry experts.

Pre-GST sales impact subdue FMCG cos performance in Q1: Experts
Although few FMCG players have reported decent profits, all of them have attributed the dip in sales due to transition in the run up to GST

According to a PTI report: While HUL reported a 9.28 per cent increase in its first quarter net profit at Rs 1,283 crore, Dabur India saw its net profit dip by 9.80 per cent at Rs 264.86 crore.

Likewise, Kolkata-based Emami Ltd posted 98 per cent decline in net profit at Rs 1.04 crore. Similarly, Marico also reported an 11.92 per cent decline in consolidated net profit to Rs 235.94 crore for the June quarter.

Godrej Consumer Products Ltd reported an 8.70 per cent decline in consolidated net profit at Rs 225.17 crore for the June quarter.

The companies, in their respective financial statements said their sales were impacted due to de-stocking by channel partners ahead of GST implementation in July.

“It was expected that companies would not come out with encouraging results as trade vacuum happened and they would have definitely performed better if the GST would not have been implemented,” Chairman, , told PTI.

However, he said GST is a revolutionary reform and the impact of it will normalise by the next quarter and would reflect in the Q2 and Q3 results of the companies.

Commenting on the performance of the FMCG firms in Q1, Kotak Mutual Fund Senior VP and Head of Equity Research Shibani Kurian told PTI: “The volume and revenue growth for the FMCG companies would have been higher by around few percentage points had GST not been implemented.”

Although few FMCG players have reported decent profits, all of them have attributed the dip in sales due to transition in the run up to GST.

“Most of the companies in the sector would have likely performed a shade better in terms of profitability as operating leverage in the business is high,” Kurian was further quoted by PTI as saying.

When asked how long would it take for the companies for sales to pick up, Whole-Time Director, Arihant Capital Markets Ltd, Anita Gandhi told PTI: “It may take one or two quarters and when complete GST implementation takes place successfully, the industry will come back to normalcy.”

Kurian also said channel inventory should be back to normal during the early part of the next quarter.

She, however, said understanding the system of filing of tax credits may take some longer for the sector at large.

Dabur India’s income from operations during the quarter was down 7.04 per cent to Rs 1,871.34 crore, as against Rs 2,013.23 crore in the corresponding quarter a year ago.

Marico also reported 3.73 per cent decline in income from operations at Rs 1,715.28 crore as against Rs 1,781.78 crore in the April-June quarter of 2016-17.

Similarly, Kolkata-based Emami’s net sales during the period under review were at Rs 541.1 crore as against Rs 645.43 crore in the year-ago quarter, a decline of 16.16 per cent.

In Q1, HUL’s net sales stood at Rs 9,094 crore as against Rs 8,662 crore in the corresponding quarter a year ago, up 4.98 per cent.