FMCG Q4 Results Preview: Weakness In Demand Environment To Continue, Predicts Nirmal Bang

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Nirmal Bang Report

Early commentaries from some FMCG players like Marico, Dabur and Godrej Consumer Products and our interactions with the management of other consumer staple companies suggest that the overall demand environment continues to be sluggish amid inflationary pressures across the commodity price basket and slow growth rates in urban India. 

Q4 FY25 is likely to witness the effect of YoY gross margin contraction for several FMCG companies due to elevated raw material prices. This, along with rising ad spends, means that cumulative Ebitda margin is likely to decrease by 200bps YoY, with decline in absolute Ebitda for the coverage universe.

Commodity cost outlook is significantly elevated for some companies as highlighted in our commodity cost note released recently, with prices of RMs such as Palm Fatty Acid Distillate, Tea and Coffee not showing signs of retreat on a YoY basis.

We are expecting our FMCG coverage universe to clock mid single digit revenue growth of 6% YoY.

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