Rise in summer temperatures led to customers buying more ACs, coolers, fans and refrigerators
Talks of a slowdown across industries are common across corporate corridors. But amid the gloom, the white goods industry has been an outlier with an average 30 percent sales growth in Q1 FY20.
Industries like auto and fast moving consumer durables (FMCG) have seen growth reduce to a trickle due to tepid sales. However, white goods firms have seen a clear jump in sales.
Take Bajaj Electricals for instance. Among business segments, consumer durables saw a 31.7 percent year-on-year (YoY) rise in revenue to Rs 786.27 crore in the first quarter. However, the engineering procurement & construction (EPC) business saw a 5.3 percent drop in revenue to Rs 514.32 crore in the quarter under review.
Anant Purandare, Chief Financial Officer, Bajaj Electricals, told Moneycontrol that the consumer durables business has performed better than other industry segments.
“While we faced seasonality, for instance, in fans and coolers in Q1, Q2 sees higher sales on account of the festive season. In Q3, sales of room and water heaters heat up on account of winter. Given our distribution reach, Bajaj Electricals should be able to maintain and sustain current growth levels,” he added.
His industry peers are also seeing a similar growth levels. Voltas saw a 24 percent YoY rise in gross sales in Q1 to Rs 2,647 crore.
With strong growth in air conditioner sales, Voltas saw a 47 percent YoY increase in room AC sales to Rs 1,749 crore in the June quarter. However, the electro-mechanical projects and services segment saw a 4.9 percent drop.
Other players like Orient Electric and Crompton Greaves Consumer Electricals (which constitutes 80 percent of their revenue mix) saw a 31.7 percent and 16 percent growth in the consumer durables business in Q1, respectively .
Among products, only lighting and television have seen a drop in revenue, driven by taxation and fall in orders from government projects (public lighting).Weather plays saviour
White goods’ sales is proportional to the weather. If the summer is strong and monsoon delayed, sale of fans, refrigerators, air-coolers and ACs go up. Last year, unseasonal rains had led to an impact on AC sales since a dip in summer temperatures meant that people did not require a cooling device.
However, this year the summers were harsh. This has led to a bumper sales for all cooling products.
Kamal Nandi, Business Head & Executive Vice-President, Godrej Appliances, said the industry has not seen any slowdown in the appliances space, primarily because summers were hotter compared to last year.
“We expecting a pick-up in sales during the Onam season. Last year, there was Kerala floods that impacted sales. There could be a pent up demand and that should convert into consumption this year,” Nandi added.Going forward, the festive season, which constitutes 40-45 percent of annual sales of appliance makers, is also expected to be positive. This period begins from Onam in September and will last till December 31.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.