Marico net up 46% on strong volumes

Beating street estimates, consumer goods major Marico reported a 46 per cent growth in net profit for the quarter ended June 30, to Rs 124 crore. Net sales increased 22 per cent to Rs 1,270 crore, aided by an underlying volume growth of 14 per cent and price-led growth of eight per cent.

Analysts had expected Marico to report a net profit of about Rs 115 crore on sales of Rs 1,230 crore. But the Mumbai-based company surpassed expectations, thanks to a growth of key brands Parachute and Saffola.

Marico’s gross margins during the quarter was 27.1 per cent, as against 21.5 per cent in the year-ago period.

“The quarter witnessed a sharp decline in copra prices that led to an overall reduction in input costs. Market price of copra, the input for coconut oil, which accounts for about 40 per cent of the group’s raw material cost, was about 38 per cent lower year-on-year,” Chaitanya Deshpande, executive vice-president, and head, investor relations and M&A, Marico said.

However, price of safflower oil and rice bran, both used in Saffola cooking oil, were up 46 per cent and 20 per cent, respectively, he added.

Marico also raised its advertising and sales promotion expenditure to 12.3 per cent of sales in the June quarter, from 9.3 per cent a year ago.

Despite this, operating margins were up, touching 15 per cent in the quarter, as against 12.3 per cent last year.

Going forward, company executives expect some impact of the weak monsoons on sales in the coming quarters. Deshpande said he saw an impact in the second-half of the year as consumers cut-back on purchases. "While FMCG companies marketing items of daily consumption are not affected as much as some other industries might be, there could be an effect on consumer demand especially for items of discretionary consumption in our portfolio," he said.

Over the next few quarters, Marico is also looking to integrate brands Set Wet, Zatak and Livon acquired from Reckitt Benckiser.

"The annual turnover of the acquired business was about Rs 150 crore in the last financial year. The business has the potential to grow by 25 to 30 per cent over the next few years considering its presence in the fast-growing male styling and grooming segment," Deshpande said.

Marico's service wing Kaya continued to be a weak spot, widening its loss at PBIT (profit before interest and tax) level to Rs 7.3 crore from Rs 5.58 crore last year. This increase in loss was primarily due to a one-time exceptional loss of Rs 4.8 crore on account of proposed sale of a Kaya training centre building, the company said.

The Marico stock was down 2.81 per cent on the Bombay Stock Exchange (BSE) to close the day at Rs 188.70.