Marico tumbles over 7% in three sessions

Marico was down 6.69% at Rs 365.45 as weakness in the domestic business dented sentiment.

Shares of Marico tanked 7.39% in three trading sessions to its current market price of Rs 365.45, from a recent closing high of Rs 394.65 on 24 October 2019.

FMCG major Marico posted 16.5% rise in consolidated net profit to Rs 247 crore in Q2 September 2019 over Q2 September 2018. Its net sales during the quarter under review were down 0.44% to Rs 1,829 crore as against Rs 1837 crore in the corresponding quarter of the previous fiscal.

Revenue was almost flat on a YoY basis, with an underlying domestic volume growth of 1% and constant currency growth of 9% in the international business. The Q2 result was announced after trading hours on Friday, 25 October 2019.

Benign inputs costs in the domestic and Bangladesh businesses led to gross margin expansion by 561 bps on a year-on-year basis.

EBITDA grew 16% to Rs 353 crore in Q2 September 2019 over Q2 September 2018. EBITDA margin expanded by 270 basis points to 19.3% during the said period, as the company actively invested behind capability and brand building during the quarter.

In the backdrop of an accelerated slowdown in consumption witnessed during the quarter, the domestic business clocked a turnover of Rs 1,398 crore, down 3% on a year-on-year basis. The company said it will continue to focus on a balanced approach towards volume growth and healthy profitability.

In Q2 September 2019, Marico's International business grew by 9% in constant currency terms to Rs 431 crore led by broad based growth in Bangladesh. Gross margin expansion in the Bangladesh business led to a rise in the operating margin of the international business from 19.1% in Q2FY19 to 21.6% in Q2FY20. However, margins should moderate as the firm continues to invest and plough back savings to drive incremental growth. The company aims to maintain international operating margin at circa 20% over the medium term.

The overall demand and consumer sentiment was considerably dented by the sombre macro-economic narrative in the first half of the year. The company aims for a volume growth of 8-10% and a topline growth of 13-15% (depending on inflation) over the medium term. However, the firm expects volume and value growth in FY20 to be in single digits. Operating margin is expected to be maintained at 18-19% over the medium term.

Marico is a leading Indian group in consumer products in the global beauty and wellness space.

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