Margin pressure continues for FMCG firms in Q1

Inflation In Select Commodities Weighs On Results

- VIVEAT SUSAN PINTO

A REVIVAL IN urban demand in the June quarter has brought relief to fast-moving consumer goods (FMCG) companies after months of slowdown. But the pain is not over yet for firms as margins continue to be under pressure amid inflation in select commodities such as copra, palm oil and wheat. Firms have also stayed away from taking sharp price hikes to mitigate input cost pressures. This has been done to minimise impact on volume growth, top executives and analysts said, as demand conditions improve in FMCG.

A look at the earnings before interest tax depreciation and amortisation (Ebitda) margins reported by most firms in Q1 shows a decline of around 100-430 basis points during the period. At the same time, companies have seen a volume growth of about 4-9% in Q1, while price-led growth has been around 2-4% only. One basis point is one-hundredth of a percentage point.