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FMCG, manufacturing firm earnings seen up
Wed Oct 14, 2015 3:08 pm
Sri Lanka FMCG, manufacturing firm earnings seen up
Oct 13, 2015
ECONOMYNEXT – Sri Lankan fast moving consumer goods and manufacturing companies are expected to report higher earnings in the September quarter given low fuel and commodity prices and deflationary conditions that have improved buying power, brokers said.
The effect of the price reductions on the economy were seen large as deflation was last reported two decades back, Sampath Securities said in an earnings note to clients.
“We expect the level of consumption to be increased over the quarter with the reduced price levels. As a result we expect companies with FMCG exposure to post notable results during the period.”
The island has been experiencing deflation in the three months to September after the new government reduced prices of essentials items in the food and non-food categories earlier this year.
The brokers said sharply lower global commodity prices during the quarter should also help manufacturers by reducing costs.
Oil prices declined by 24 percent to 46 US dollars a barrel in September from the end of June while copper prices dropped 12 percent due to weak demand from larger economies.
Global cotton prices declined 12.3 percent during the quarter to 59.2 US cents a pound due to a supply glut while aluminum prices dropped five percent.
“Further, domestic fuel prices revised down earlier this year remained constant during the quarter and electricity tariffs revised down also remained unchanged,” Sampath Securities said.
“Therefore, since the commodity prices and energy prices remained favourable during the quarter, we expect certain counters in the manufacturing sector to report bolstered results.” (Colombo/October 13 2015)
Oct 13, 2015
ECONOMYNEXT – Sri Lankan fast moving consumer goods and manufacturing companies are expected to report higher earnings in the September quarter given low fuel and commodity prices and deflationary conditions that have improved buying power, brokers said.
The effect of the price reductions on the economy were seen large as deflation was last reported two decades back, Sampath Securities said in an earnings note to clients.
“We expect the level of consumption to be increased over the quarter with the reduced price levels. As a result we expect companies with FMCG exposure to post notable results during the period.”
The island has been experiencing deflation in the three months to September after the new government reduced prices of essentials items in the food and non-food categories earlier this year.
The brokers said sharply lower global commodity prices during the quarter should also help manufacturers by reducing costs.
Oil prices declined by 24 percent to 46 US dollars a barrel in September from the end of June while copper prices dropped 12 percent due to weak demand from larger economies.
Global cotton prices declined 12.3 percent during the quarter to 59.2 US cents a pound due to a supply glut while aluminum prices dropped five percent.
“Further, domestic fuel prices revised down earlier this year remained constant during the quarter and electricity tariffs revised down also remained unchanged,” Sampath Securities said.
“Therefore, since the commodity prices and energy prices remained favourable during the quarter, we expect certain counters in the manufacturing sector to report bolstered results.” (Colombo/October 13 2015)
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Re: FMCG, manufacturing firm earnings seen up
Thu Oct 15, 2015 1:59 pm
this report is fairly accurate!
The FMCG entities indeed would have budgeted the full year leaving margins for the increase in USD, inflation, price increases in fuel and other imported raw materials.
They usually do not reduce the prices of their products should there be favourable conditions despite that they make good profits in the 1st and 2nd quarters. Their strategy is to maintain the prices without an increase to prevent a loss in demand.
By default in Sri Lanka (Geographical Phenomena) the 2nd quarter invariably is the toughest quarter in the year. The best is April/June and next best Oct/Dec for obvious reasons.
So any substantial savings during the first half will be erased in the 2nd half of the year. that means that April/Sept profits will show big profits in most FMCG companies and it will help to Jack up the share prices in Nov / DEc. But one must wait until January 2016 to see the full result.
By that time the fiscal budget would have sent the prices of raw materials sky rocketing.
So the REAL QUESTION is what will be the fiscal budget in Nov 2015?
The FMCG entities indeed would have budgeted the full year leaving margins for the increase in USD, inflation, price increases in fuel and other imported raw materials.
They usually do not reduce the prices of their products should there be favourable conditions despite that they make good profits in the 1st and 2nd quarters. Their strategy is to maintain the prices without an increase to prevent a loss in demand.
By default in Sri Lanka (Geographical Phenomena) the 2nd quarter invariably is the toughest quarter in the year. The best is April/June and next best Oct/Dec for obvious reasons.
So any substantial savings during the first half will be erased in the 2nd half of the year. that means that April/Sept profits will show big profits in most FMCG companies and it will help to Jack up the share prices in Nov / DEc. But one must wait until January 2016 to see the full result.
By that time the fiscal budget would have sent the prices of raw materials sky rocketing.
So the REAL QUESTION is what will be the fiscal budget in Nov 2015?
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