In Q2FY22, revenue growth was backed by an underlying volume growth of 8% in the domestic business and constant currency growth of 13% in the international business.
Marico said that as lockdown restrictions were eased, macro indicators were supported by rising mobility, which crossed pre-pandemic levels for the first time in September. With more than 90% of the companys portfolio comprising daily-use items, it witnessed healthy demand trends across these categories, while discretionary and out-of-home consumption also picked up to some extent. Traditional trade stayed firm on a high base. Rural growth exceeded urban during the quarter and on a 2-year CAGR basis, but has slowed down sequentially. Alternate channels grew in double digits and CSD recovered smartly on a low base.
In the International business, the company witnessed a steady quarter in all markets, except Vietnam, which was contending with a severe COVID surge during the quarter.
Gross margin improved sequentially by approximately 140 bps, but was down approximately 560 bps YoY as edible oil and crude oil prices remained at elevated levels. EBITDA margin in Q2 FY22 stood at 17.5%, down 210 bps YoY. EBITDA at Rs 423 crore in Q2 FY22, was up 9% YoY.
Advertising & Sales Promotion spends was at 8.0% of sales, as the Company maintained its investments in core franchises and recent Foods innovations. Ad spends will rise in the forthcoming quarters, the company said.
Maricos India business delivered a turnover of Rs 1,870 crore ($253 million), up 24% on a YoY basis. The underlying volume growth was 8%. The operating margin was lower YoY at 17.8% in Q2FY22 vs 20.6% in Q2FY21, owing to sharp input cost pressure which was only partly alleviated by pricing interventions in key portfolios and ongoing cost rationalization measures.
Parachute Rigids grew 7% in volumes, backed by increasing penetration in both core and non-core markets. Extending its market leadership, volume market share of the brand rose by 180 bps in rigid packs (MAT Sep21).
Value Added Hair Oils delivered value growth of 16%, largely driven by volumes. Mid and premium segment brands gained salience during the quarter. The Company gained 40 bps in volume market share (MAT Sep21).
The Saffola franchise, comprising refined edible oils and foods, grew 46% in value terms. Saffola Edible Oils had a muted quarter, largely due to volatility in edible oil prices (leading to trade destocking during the quarter) and partly owing to lower in-home consumption. Saffola Foods grew by approximately 70% in value terms, with both core and new franchises pitching in. The base oats franchise grew by 36% in value terms backed by increased penetration and market share gains. Saffola Honey is tracking in line with internal targets and should reach an exit run rate of Rs 100 crore this year. Saffola Oodles and Saffola Mealmaker Soya Chunks also continued to scale up well.
Both franchises of the Premium Personal Care (contributing less than 5% of revenues) witnessed improving traction and posted double-digit growth. Livon Serums moved ahead of pre-COVID run rates, while Male Grooming is still to attain the pre-COVID run rates. Beardo and Just Herbs scaled up in line with expectations.
The company said that the copra price was down 11% sequentially and down 5% YoY. With the supply outlook improving, prices are expected to remain range bound in the near term. COVID-19 led disruptions and major weather anomalies in key growing regions led to sustained inflation in global vegetable oil prices. As a result, Rice Bran oil was up 59% YoY and 7% sequentially in line with global trends. The reduction in the import duty on vegetable oils is yet to reflect in domestic vegetable oil prices, but the company expects some correction in the coming quarters. Crude derivatives such as Liquid Paraffin (LLP) and HDPE were also up 30% and 26% YoY respectively. Both are expected to remain firm in the near term.
Maricos international business delivered a turnover of Rs 549 crore ($74 million), up 14% on a YoY basis with constant currency growth of 13%. The operating margin in the international business was at 24.1% in Q2FY22 vs 23.3% in Q2FY21.
In the International business, Bangladesh clocked 16% constant currency growth. South East Asia was down 2% in constant currency terms, due to the severe COVID surge and strict lockdowns enforced in the region. MENA and South Africa grew 20% and 8% in constant currency terms.
With respect to near term / medium term outlook, Marico said that since the pace of rural growth has moderated despite normal monsoons and continued government stimulus, some degree of caution in the near term growth outlook is warranted. The company believes that the pattern of growth over the next few months will throw sufficient light on the underlying trend.
In the current scenario, it expects to deliver double-digit revenue growth in the domestic business on the back of mid-single digit volume growth in H2. This will also translate to a healthy double-digit 2 year CAGR in volume terms. However, the company believes high-single digit volume growth is possible in Q4, if consumption trends do not worsen.
In the International business, the company will continue to monitor the evolving COVID situation in Vietnam, which could remain soft in the immediate near term. It expects a gradual recovery as the government has begun easing restrictions. However, the company should be able to deliver double-digit constant currency growth in the international business in H2.
?We expect gross margin to improve sequentially in Q3 and Q4. However, we expect an improvement in operating margins to play out only in Q4, given that ad spends will rise from Q3 itself and a large part of the benefits of a second round of cost rationalization measures will start accruing in Q4.
Over the medium term, we hold our aspiration to deliver 13-15% revenue growth on the back of 8-10% domestic volume growth in the domestic business and double-digit constant currency growth in the international business. We will aim to maintain consolidated operating margin above the threshold of 19% over the medium term,? Marico said.
Marico is a leading Indian group in consumer products in the global beauty and wellness space.
The scrip fell 2.46% to end at Rs 561 on the BSE today.
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