Rising input costs to weigh on FMCG margins despite demand recovery in Q2

Rising input costs are likely to put pressure on operating margins for Indian fast-moving consumer goods companies in the September quarter, even as resilient demand and growth in key product categories support revenue expansion.

A sharp rise in crude oil and its derivative products used in packaging, along with a persistent inflationary trend in various commodities and deficit rainfall, has increased cost pressures across companies depending on their product mix, pricing power and cost-saving measures.

A report from brokerage ICICI Direct said higher crude and crude-derivative prices, coupled with increases in other key input costs, are likely to affect earnings before interest, taxes, depreciation and amortisation (EBITDA) margins of most home and personal care companies.

"Spike in the crude oil/crude derivative prices coupled with increase in the other key input prices will have impact on the EBITDA margins of most of the home care and personal care companies under coverage," it