NEW DELHI: After a dismal performance in the first quarter of fiscal 2020, FMCG companies could be in for another round of slowdown, reporting low single-digit volume growth in Q2, say analysts. Stating that challenges in the market continue to hit the profitability of companies, Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss, said “the continuing liquidity crunch is now hurting retailers as well, which is further pressuring volumes at consumer goods companies.”
Further, agricultural distress owing to patchy monsoon and lower ramp-up of the PM-Kisan scheme are unlikely to reverse the deceleration in the rural economy. Rural growth, which grew on a par with urban growth in Q1FY20, is losing steam — with rural growth now pegged at 0.9x of urban growth.
Analysts also say that in staples, Godrej Consumer Products Limited’s India business would have among the best volume growth of 5.7 per cent YoY on the back of a gradual recovery in its household insecticide portfolio. Emami, on the other hand, would continue to lag with 1 per cent YoY dip in volume growth. As the prices of wheat and milk have risen year-on-year, companies such as Nestle and Britannia could be impacted, Edelweiss said in a note.