FMCG Preview: Revival in rural markets to boost profits in Q1FY19

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26 Aug, 2025 12:21

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Fast moving consumer goods (FMCG) companies are expected to see a further uptick in volume growth in the first quarter, aided by a pickup in the underlying demand and driven by improvement in rural markets.

The earnings for the FMCG sector will kick-start with industry giant Hindustan Unilever reporting its first-quarter (April-June) results on July 16.

According to various analysts reports, the volume growth will also be pushed by a favourable base, given the destocking at trade channels prior to Goods and Services Tax (GST) implementation in  Q1FY18.

The government had implemented GST across the country from July 1, 2017.

Almost all analysts expect a high single to double-digit volume growth within the FMCG sector in April-June quarter of FY19.

According to IDFC Securities, "In terms of input costs, prices of crude and crude-linked commodities will continue to inch up, which could impact gross margins in the sector sequentially."

However, a favorable price/mix and moderation in palm oil prices (down ~14 percent year-on-year) will curtail the impact on gross margins for home and personal care players, the report stated

While inflation in agri-commodities could adversely impact Marico’s gross margins, moderation in prices of milk and skimmed milk powder (SMP) will continue to benefit food players like Nestle.

However, the benefit of operating leverage, GST-led savings as well as focus on cost efficiencies could result in year-on-year (YoY) expansion in the earnings before interest, tax, depreciation, and amortisation (EBITDA) margins in Q1FY19.

Most brokerage firms estimate sales, EBITDA and profit after tax (PAT) growth of 11 percent, 20 percent, and 18 percent YoY, respectively, for Q1FY19.

Major players

Hindustan Unilever, India's biggest consumer goods company, had reported a 9.3 percent YoY rise in net profit to Rs 1,283 crore for the first quarter that ended in June 2017.

Dabur and ITC are expected to post double-digit earnings growth within the consumer staples universe in Q1FY19, while Nestle and Godrej Consumer are expected to outperform with strong 43 percent,  and 20 percent YoY earnings growth, respectively, during the quarter.

In Q1FY17, Dabur India posted a fall of 10 percent in its net profit to Rs 264.86 crore, while cigarette-to-soap maker ITC had reported 7.4 percent jump in net profit at Rs 2,560.5 crore.