Marico Q1 Results: Profit Rises 48% Sequentially But Volumes Decline
Net profit of the maker of Saffola cooking oil rose 48% sequentially to Rs 371 crore in the quarter ended June.
Marico Ltd.’s quarterly profit rose, in line with estimates, but volumes fell as steep price hikes led to downtrading across two of its largest brands.
Net profit of the maker of Parachute hair oil and Saffola cooking oil rose 48% sequentially to Rs 371 crore in the quarter ended June 30, according to its exchange filing. That compares with the Rs 367.7-crore consensus estimate of analysts tracked by Bloomberg.
On a year-on-year basis, the company reported a 4% increase in net profits due to higher effective tax rate after the expiration of fiscal benefits in one of the manufacturing units.
Marico Q1 Results FY23: Key Highlights (QoQ)
Revenue up 18% to Rs 2,558 crore, against the Rs 2,602.18-crore forecast. It rose 1.3% over the previous year.
Operating profit rose 53% to Rs 528 crore, compared with the estimated Rs 505.4 crore.
Margin stood at 20.6% versus 16%. Analysts had pegged it at 19.4%.
Advertising and promotion spend fell 2.45% to Rs 204 crore.
Revenue from India business rose 16.14%. On a year-on-year basis, revenue fell 3.56% to Rs 1921 crore.
Volumes in India's FMCG sector declined for the third straight quarter in April-June 2022, as value growth continued to be price-led, according to NielsenIQ India estimates. For Marico, domestic volumes declined by 6% over the previous year, dragged by a double-digit decline in Saffola oils.
Ex-Saffola, the domestic volume growth was up 1%, the company said.
The Saffola brand chose to maintain margins over volumes in the face of unprecedented raw material inflation, muted trade sentiment, supply-chain issues and the undesirable effect of price hikes. The business also declined sharply due to a high base effect of in-home consumption. In value terms, the Saffola franchise fell 13%.
The Parachute hair oil business declined 2% in volume terms and 9% in value in the three months through June 30. "Gradual pickup in volumes expected from Q2," according to Marico's investor presentation.
The company's value-added hail oil business, however, grew 5% year-on-year in value terms on flattish volumes. That despite weak a consumption sentiment, especially in rural markets. The company countered higher input costs through a mix of price hikes and pack size reductions. The franchise gained 60 basis points in value market share.
Foods had a slow quarter due to the high in-home consumption base in oats and sharp decline in immunity-led categories like honey, among others. Premium personal care and digital-first portfolios clocked high double-digit growth, according to the company's presentation.
“The year began on a mixed note with the domestic business contending with persistent inflation and resultant weak demand conditions," MD & CEO Saugata Gupta said.
But despite the strong headwinds, the company gained market share in 96% of its portfolio. The volume growth, Gupta said, is expected to be in the "positive zone" from Q2 under current demand conditions. "We hope to accelerate volume growth to our medium-term target levels in H2 FY23, provided inflation cools off and eases pressure on demand."
In the medium term, the company aims to deliver 13-15% revenue growth on the back of 8-10% domestic volume growth, and double-digit constant currency growth in the international business.
Marico also aims to maintain operating margin of 18-19% in FY23.
The international business, however, sustained its growth momentum. It delivered 18% constant currency growth over the previous year, driven by Vietnam (34%), Middle East and North Africa (27%), South Africa (23%) and Bangladesh (10%).
On Friday, Marico shares 2.28% to Rs 519.55 apiece on the BSE even as the benchmark S&P BSE Sensex ended the day 0.15% higher at 58,387.93 points.