Marico records PAT of Rs 301 crore in Q2; domestic volume growth at 3%

5 Nov 2022 , 09:26 AM

The company recorded a volume growth of 3% in the domestic business and constant currency growth of 11% in the International business. In India, as retail inflation held firm, the FMCG sector witnessed a volume decline for the fourth quarter in a row, with growth led by pricing. Demand sentiment was largely on similar lines as the preceding quarter and improved slightly only in the last month of the quarter owing to the upcoming festive season. After a tepid Q1, the Company recovered to post reasonable growth in domestic volumes on the back of healthier traction among urban and premium discretionary portfolios. Domestic revenues was at Rs 1896 crore, up 1% YoY, as price hikes in Hair Oils and Premium Personal Care portfolios were more than offset by price cuts in Parachute Coconut Oil and Saffola Oils. Among the sales channels, General Trade remained weak, while the divergence in rural and urban growth grew starker with the former reeling under persistent inflationary and liquidity pressures. MT and E-commerce, on the other hand, grew in double digits. The international business sustained its double-digit constant currency growth momentum for the seventh quarter in a row. Each of the markets exhibited strength amidst macroeconomic uncertainty and currency devaluation headwinds in some markets. Within the International business, Bangladesh clocked 10% constant currency growth. South East Asia grew 10% in constant currency terms, led by strong HPC growth in Vietnam. MENA and South Africa grew 11% and 16% in constant currency terms. Marico said that the copra prices were down 4% sequentially and 20% YoY. With seasonal supplies slowing down, prices should remain range-bound in the near term. Rice Bran oil was down 15% sequentially and 11% YoY. However, vegetable oil prices have firmed up in the last fortnight of October and are likely to be volatile in the near term. Crude derivatives such as Liquid Paraffin (LLP) and HDPE were up 48% and 20% YoY. Both are also likely to remain firm in the near term and trend in line with crude oil prices. On the expenditure side, raw material costs rose by 1% YoY, advertising & sales promotion (ASP) expenses jumped by 10% YoY, employee cost increased by 8% YoY and other expenses were higher by 8% on YoY basis. While EBITDA improved by 2% to Rs 432 crore, EBITDA margin declined by 17 bps to 17.3% in Q2 FY23 as compared with the same period last year. This was mainly due to losses on translation of foreign currency receivables and higher effective tax rate (ETR). Profit before tax in Q2 FY23 stood at Rs 400 crore, down by 1% from Rs 405 crore in Q2 FY22. Gross margin expanded 115 bps YoY, but was lower sequentially due to consumption of higher cost inventories of raw materials and adverse cost impact of depreciating currencies in select international markets. In its near-term outlook, Marico said that it expects to deliver mid-single digit volume growth in H2. In the International business, the company is confident of maintaining the double-digit growth momentum in the coming quarters. It further added that the gross margins should improve sequentially from Q3 as copra remains in the soft zone, while the recent volatility in vegetable oils keeps us watchful. Taking into account the quarterly gyrations of all cost line items, the company maintains its aspiration to deliver 18-19% EBITDA margin in FY23. Over the medium term, the company holds its 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. It will aim to maintain consolidated operating margin above the threshold of 19% over the medium term. Saugata Gupta, MD & CEO, commented, ?The first half ended on a fairly positive note despite the operating environment bringing little cheer. We are hopeful of a much better performance in the core domestic portfolio in the second half of the year as macro indicators and the base turn more accommodative, while the new engines continue to deliver on their promise. We are confident of sustaining the strong and profitable growth trajectory in the international markets and staying resilient amidst uncertainty in some of the markets. We believe consistent investment in our brands and focus on execution will enable us to deliver competitive volume led growth and maintain healthy profitability over the near and medium term.? Marico is one of Indias leading consumer products companies in the global beauty and wellness space. Its portfolio includes brands such as Parachute, Saffola, Saffola FITTIFY Gourmet, Saffola ImmuniVeda, Saffola Mealmaker, Hair & Care, Parachute Advansed, Nihar Naturals, Mediker, Coco Soul, Revive, Set Wet, Livon and Beardo. The scrip ended flat at Rs 539.35 on the BSE on Friday. Powered by Capital Market – Live News