FMCG sector poised to make profits
By Our Corporate Bureau | 13 Nov 2001
Mumbai: The fast-moving consumer goods (FMCG) sector has apparently decided to put its efforts on improving profitability in the present demand constraint period, as it can do little more to stimulate and push the consumer to pick up more of their products off the shelves.
This becomes evident from the results that have poured in during the first six months of the current fiscal. The trend is very clear. While the growth in revenues has been say X, growth in profits has been more than X.
Rise in profitability
would have been more but for the higher sales promotion expenses
incurred by these companies. A study of the working of a sample of
12 FMCG companies shows that while sales at Rs 5,819 crore is up
3.50 per cent, the net profit at Rs 900 crore has increased a
smart 19 per cent.
The growth primarily has
come through
1) Cut in costs, and
2) Rise in other income elements.
The other income component, in the six-month period ended 30 September 2001, shot up 42 per cent to Rs 223 crore. The companies, which have been part of the study sample, are Reckitt Benckiser, Smithkline Beecham Consumer, Trent, Britannia Industries, ITC, HLL, Gillette India, Colgate Palmolive, Nestle India, P&G Hygine and Cadbury India.
Look at how the figures have worked for some of these companies. In the case of HLL, while sales rose 7per cent to Rs 2,635 crore, the net profit increased 21 per cent to Rs 399 crore. Without taking into account other incomes, the net profit shows an increase of 14 per cent.
Similarly, in the case of ITC, while sales declined marginally to Rs 1,002 crore from Rs 1,004 crore, the net profit jumped 29 per cent to Rs 334 crore. Here too other income is up 75 per cent to Rs 65 crore.