Marico net up 21% to Rs 105 cr on higher volumes

Consumer products company Marico posted a 21.4% growth in net profit to Rs 104.55 crore in the three months ended December 2012 versus Rs 86.11 crore reported last year.

Net sales rose nearly 11% to Rs 1,163.99 crore as against Rs 1,050.02 crore reported last year.

At a time, when companies such as Hindustan Unilever have seen volumes come down in the December quarter, Marico, in contrast, posted decent numbers on that front. Underlying volume growth for Marico during the quarter was nine%, while price-led growth was two%, Chaitanya Deshpande, executive vice-president and head of investor relations & M&A said.    

Much of the growth that the company saw in the third quarter was in the India business, with key brands Parachute, Saffola as well as the the personal care portfolio acquired from Reckitt growing at about 5-6% during the quarter, Deshpande said.

While still tad lower than the about 8-12% volume growth that the two brands have clocked in previous quarters, Deshpande said that given the pressure on discretionary spends, the numbers posted were reasonable. Marico is expected to pass on the benefit of lower input prices to consumers by correcting the price of Saffola and Parachute by about 5-7% in the next two weeks. This is expected to push up volume growth of the two brands, Deshpande said.

In the last one year, key inputs such as copra, which goes into the making of coconut oil is down by about 23-24%. Inputs such as rice bran oil that is used to make edible oils have also been stagnant from a price point of view in the last few months. Analysts estimate input prices to be steady for the next few months at least as supply constraints ease.  

The gains made on the raw material front will likely result in companies pushing up advertising and sales promotion (ASP) expenditure as competition grows. This was visible in the third quarter, with Marico's ASP up 160 basis points to 13.5% of sales versus 11.9% of sales last year. On an average, FMCG companies who have reported their results so far have seen at least a 100 to 200 basis-point increase in ad spends during the quarter.

Marico's operating margins, meanwhile, were up 100 basis points to 14.2% during the quarter despite the increase in ad spends.

Marico's Kaya business, which will be demerged into a separate listed company in the next financial year grew five% during the December quarter. The company is expected to add more small-format stores call Kaya Skin Bars in the coming months in in a bid to push up sales and cut costs.

Marico's international business, which contributes about 23-25% to the company's overall revenues, showed no significant growth during the quarter. "Barring Egypt and Vietnam, which grew by 26% and 14% respectively, we saw no growth in key markets such as Bangladesh and the Middle East," Deshpande said. He attributed the lack of growth to macro-economic issues plaguing those markets.

Shares of Marico were up 1.21% on the Bombay Stock Exchange (BSE) to close the day at Rs 230.10. Its intra-day high was Rs 232.95 and low was Rs 223.20.