Protests in Bangladesh, wage hikes in Indonesia and weak consumer sentiment in Egypt- just a few more reasons giving Indian FMCG-company managements spending sleepless nights.
Analysts say these unheavals could result in a poor performance by FMCG companies with a big international presence.
The most affected is GCPL ( Godrej Consumer Products Ltd ) which depends on international markets for 45 percent of revenues followed by Dabur with a 30-percent exposure and Marico with a 25-percent exposure. The recent Shahbag Square protests in Bangladesh will hurt Marico the most.
Bangladesh accounts for 10 percent of Marico's overall sales and 40 percent of its international business. And analysts are busy factoring in the impact while working on what to expect from the company's fourth-quarter earnings report.
"For the last three quarters, Marico's performance in Bangladesh has been tepid. During this quarter. The Shahbag protests on since March 1 could clearly impact sales for 15-20 days during that period. To that extent, the protests may have a 10-30 percent impact on sales during the quarter," says Anand Mour, analyst, ICICI Securities.
GCPL's performance, on the other hand, will take also be affected by developments in Indonesia and Argentina. Indonesia contributes up 19 percent of GCPL's topline and is its best-performing international market. But Indonesia has hiked minimum wages by 44 percent- from US 158 a month to US 228.
Experts argue that while the move may spur consumption in the country, it will mean higher wage-costs for GCPL which could squeeze margins by as much as 100 basis points in the fourth quarter alone.
In Argentina, GCPL has to come to terms with a government diktat that freezes price hikes on FMCG products to tame inflation. For companies like Dabur which has been enjoying the cruise up the Nile, the crocodiles are circling.
Egypt's consumption atmosphere has been dropping. Its consumer confidence index has slipped 16 percent between November and December 2012 and this could mean that the usual 9 percent contribution from the Middle-East to total revenues may not come in this time. But analysts bet that the weakening consumption-cycle will not last.
Kaustubh Pawaskar, analyst, Sharekhan says, "In the near-term, there may be some volatility, but in the long term Egypt will be one of the key drivers of the international biz for some of these companies."
While the consolation that the impact of these socio-political fracases may not be long-lived is small, FMCG companies are starting to come to terms with the possibility that they may be headed for their weakest results in four quarters.
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