Several renowned FMCG companies such as Dabur, Hindustan Unilever (HUL), Marico, Emami have performed both ‘well and hell’ in the first quarter after the implementation of GST while also, their sales have not been influenced due to destocking of GST, said industry experts.
According to reports, HUL got an increased 9.28 per cent net profit at INR 1,283 crores in the first of quarter of 2017, whereas Dabur India declined by 9.80 per cent at INR 264.86 crore.
Similarly, Kolkata based Emami Ltd posted a 98 per cent reduction in net profit at INR 1.04 crore, whereas, Marico also posted an 11.92 per cent dip in net profit at INR 235.94 crore for the June quarter. Although Godrej Consumer Products Ltd have listed 8.70 per cent reduction in net profit at INR 225.17 crore in the June quarter.
The FMCG companies in the financial statements stated that their sales were influenced due to de-stocking by channel partners after the implementation of the new regime in the month of July.
Chairman of Godrej Group, Adi Godrej, said: “It was expected that companies would not come out with encouraging results as trade vacuum happened and they would have definitely performed better if the GST would not have been implemented.” He further added that GST is a revolutionary form and the positive impact of this will seen by the next quarter, would be shown in the second and third quarter of financial statements of the companies.
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While commenting on the performance of financial statements of FMCG companies in the first quarter, Shibani Kurian, Kotak Mutual Fund Senior VP and Head of Equity Research said: “The volume and revenue growth for the FMCG companies would have been higher by around few percentage points had GST not been implemented.”
Although, some of the FMCG firms have posted good net profits in the first quarter whereas some firms have posted a decline in their net profits. All of the FMCG companies have accredited the reduction in sales due to the implementation of the new regime. Kurian said, “Most of the companies in the sector would have likely performed a shade better in terms of profitability as operating leverage in the business is high.”
When asking about how much the companies would take the time to pick up the sales, Arihant Capital Markets Ltd Whole-Time Director Anita Gandhi said: “It may take one or two quarters and when complete GST implementation takes place successfully, the industry will come back to normalcy.”
She further added that the to understand the structure of filing tax credits may take some more time for the sector at large.
Dabur India’s income from operations was the decline from INR 2,013.23 crore to INR 1,871.34 crore as 7.04 per cent as compared to previous year.
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Marico also posted 3.73 per cent reduction in net profit from operations at INR 1,715.28 crore as compared to INR 1,781.78 crore in the April-June quarter of 2016-17.
Kolkata based Emami Ltd reported a net sales of INR 541.1 crore as against INR 645.43 crore in previous year, a reduction of 16.16 per cent in the first quarter. In the first quarter, Hul’s net sales is gain from INR 8,662 crore to INR 9,094 crore as increased by 4.98 per cent compared to previous year.
FMCG companies were initially impacted by GST implementation, but have now adapted to the new system. GST has led to streamlined processes and a reduction in logistics costs.