MUMBAI: FMCG companies have flagged slowdown in sales and impact on profitability in the Sept quarter as markets prepared for the new GST regime, leading to temporary disruptions in supply chain .
Distributors and retailers stopped taking new orders to avoid stocking up shelves with products carrying old price tags while consumers deferred purchases to avail the benefits of lower taxes which kicked in from Sept 22, weighing on the growth of companies, they said in their Q2 quarterly updates.
"The GST rate reductions have resulted in some short-term adjustments across trade channels, as distributors and retailers focused on liquidating existing inventories. This has delayed the flow of new orders and temporarily deferred consumer purchases, impacting both growth and profitability," Godrej Consumer Products said, factoring in a decline in ebitda for the quarter.
Analysts expect most FMCG companies to record a mid-single digit revenue growth in Q2, while margins to remain under pressure partly on the back of short-term GST-led disruptions, they said. For Dabur , there has been a short-term moderation in sales in Sept, which will have a bearing on its Q2 performance . About 60% of Dabur's India business has been covered under the ambit of lower taxes, the maker of Hajmola and Odonil said, anticipating revenue growth to regain momentum in the coming quarters.
Marico said that it has absorbed the transitory impact of disruption in trade channels ahead of the implementation of GST. "We also extended discounts on the pipeline inventory to our channel partners during the two weeks leading up to the effective date of the GST rate changes," the company said. Analysts at Nuvama expect FMCG companies to see an adverse sales impact of 2-3% due to the GST transition, pointing to a growth revival from November.
The FMCG sector has had several challenging quarters. Even as companies navigate the interim GST disruptions, they are betting on the tax cuts to boost long-term consumption.
Distributors and retailers stopped taking new orders to avoid stocking up shelves with products carrying old price tags while consumers deferred purchases to avail the benefits of lower taxes which kicked in from Sept 22, weighing on the growth of companies, they said in their Q2 quarterly updates.
"The GST rate reductions have resulted in some short-term adjustments across trade channels, as distributors and retailers focused on liquidating existing inventories. This has delayed the flow of new orders and temporarily deferred consumer purchases, impacting both growth and profitability," Godrej Consumer Products said, factoring in a decline in ebitda for the quarter.
Analysts expect most FMCG companies to record a mid-single digit revenue growth in Q2, while margins to remain under pressure partly on the back of short-term GST-led disruptions, they said. For Dabur , there has been a short-term moderation in sales in Sept, which will have a bearing on its Q2 performance . About 60% of Dabur's India business has been covered under the ambit of lower taxes, the maker of Hajmola and Odonil said, anticipating revenue growth to regain momentum in the coming quarters.
Marico said that it has absorbed the transitory impact of disruption in trade channels ahead of the implementation of GST. "We also extended discounts on the pipeline inventory to our channel partners during the two weeks leading up to the effective date of the GST rate changes," the company said. Analysts at Nuvama expect FMCG companies to see an adverse sales impact of 2-3% due to the GST transition, pointing to a growth revival from November.
The FMCG sector has had several challenging quarters. Even as companies navigate the interim GST disruptions, they are betting on the tax cuts to boost long-term consumption.
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