Prudent Cost Management Helps Marico Maintain Figures
In the eight years since its incorporation, Marico Industries has proved to be an active player in the personal and food products industry. It has continued its good performance since 1994-95. In 1997-98, the company's sales turnover increased nearly 20 per cent as against 17.5 per cent in the previous year.
In spite of the increase in operating costs due to the introduction of a new strategy, Marico's total expenditure decreased nearly one per cent from the previous year's level. It achieved this through better management of manufacturing and operating costs which is reflected in the lower interest burden and higher profit growth.
The better performance in sales turnover was mainly due to strategic market planning and advertisements, specially for its most powerful brand _ Parachute. The company has a 52 per cent market share in the coconut oil segment, nearly 28 per cent in the hair and care segment, and 17 per cent in the cooking oil segment. Expenses on sales promotion increased by over 68 per cent during 1997-98 compared with only 0.8 per cent in the previous year.
In the international market too, Marico has improved its performance considerably. Export turnover has maintained a growth of over 50 per cent since 1995-96. This is reflected in the company's bottomline. During 1997-98, profit before tax increased nearly 32 per cent while profit after tax recorded a growth of about 50 per cent. The company's international business now extends to the Middle East, the Saarc countries, Singapore and the USA.
The profitability ratios have also improved significantly. Earnings per share (EPS) increased to Rs 20.72 (Rs 13.85), net profit margin to sales grew to 6.1 per cent (4.9 per cent), return on net worth climbed to 30.7 per cent (25.2 per cent) and return on capital employed rose to 39.7 per cent (35.7 per cent).
In the first quarter of the current year, Marico has improved its performance. Sales turnover increased by nearly 8.6 per cent to Rs 109 crore from Rs 100.75 crore in corresponding period of the previous year. Profit after tax increased to 7.3 per cent (6.6 per cent).
Despite a 70 per cent increase in depreciation owing to commissioning of the Goa plant last October, the company was able to record profits by reducing interest costs by Rs 75 lakh and tax burden by Rs 30 lakh.
By virtue of better net profit growth, the annualised EPS increased considerably during the first quarter of 1997-98. From the figures declared for the three months ended June 30, 1998, there are signs that higher returns on capital will be earned for the full year of 1997-98.
The company organised its operational structure into three main business in April this year. These are the nature care division which deals with Parachute and its extensions Parachute Lite and Nutri Sheen, Hair & Care and Revive; the health care division dealing with Sil, Sweekar and Saffola, and the international division which recently tied up with Indo Nissan foods to market Top Ramen noodles.
During 1997-98, Marico doubled its authorised share capital from Rs 15 crore to Rs 30 crore.
Its paid up capital remained at the same level of Rs 14.5 crore. By virtue of reduction in debt, the company's debt-equity ratio is now at an all-time low of 0.09, down from 0.23 previous year.
The company commissioned its Goa factory in the last fiscal with a project cost of about Rs 16.5 crore.
This plant incorporates the DeSmet Technology in oil expelling, which has been employed for the first time in the world for crushing copra on a large scale.
According to Marico chairman, Charandas V Mariwala, the 50 per cent growth in profit was partly due to a correction of deceleration during 1996-97 and hence, may not be sustainable. However, the outlook for 1998-99 is promising as raw materials availability is likely to be satisfactory except in the case of Safflower.