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Fast-moving consumer goods (FMCG) companies have expressed concern that rising palm oil prices, high raw material costs, and increased advertising expenses will impact their margins and profits in the September quarter.
In their July-September quarter updates, FMCG companies such as Godrej Consumer Products Ltd (GCPL), Dabur and Marico have reported stable margins on a year-on-year basis in July due to higher copra and vegetable oil prices.
Godrej Industries group company GCPL said that the domestic revenue growth is expected to remain stable in the September quarter. This is due to the increase in raw material costs due to high palm oil prices.
The company said, "The cost related to palm oil has been increasing since March. The management has decided not to pass on the entire increase in cost to the consumers in one go. At the same time, it has decided to continue investing in long-term development steps like the rural van program. "
"Due to this, the earnings before tax (EBITDA) growth on a standalone basis will be stable," GCPL, which sells products under brands such as Good Knight, Cinthol, and Hit, said. On the business front, the company, however, said the standalone business (domestic) is expected to perform well.
Marico said that among key raw materials, copra prices had already risen ahead of internal forecasts. Vegetable oil prices rose further towards the end of the quarter due to the recent hike in import duty.
Marico, which has popular brands like Saffola and Parachute, said, "However, crude oil futures and options trading are in a limited range. We estimate that the gross margin will decline every year due to self-bearing of a part of the higher cost of raw materials..."
Dabur, which makes consumer goods with brands like Amla, Dabur Vatika, and Real Juice, is taking steps to replenish the inventory available with distributors. Due to this, the company expects a single-digit decline in consolidated revenue for the quarter. Apart from this, Dabur has increased its expenditure on advertising.
The company said, "We are committed to continue investing to promote the brand..."
