Marico June quarter profit down 6%; domestic volumes jump 21%
Premium- Marico's revenue from operations for the three months ended June 30 rose 31% to ₹2,525 crore, aided by price hikes as well as volume growth and a soft base
New Delhi: Parachute hair oil maker Marico Ltd on Friday reported a 6% drop in June quarter profit to ₹365 crore as inflationary pressures over the last two quarters continued to impact profitability. The company, however, beat Street estimates on profits.
The company's revenue from operations for the three months ended June 30 rose 31% to ₹2,525 crore. In the year-ago period, the company’s revenue from operations stood at ₹1,925 crore.
Estimates by 15 analysts pegged Marico’s consolidated revenues at ₹2,501.30 crore during the quarter with profit estimates at ₹362.60 crore.
India operations reported underlying volume growth of 21%, albeit on a soft base and constant currency growth of 21% in the international business. Underlying volumes declined 14% in the year-ago period.
The company said input costs remained high in the last two quarters, and pricing actions partially alleviated inflationary pressure. This impacted gross margins at the company.
“Gross margin was down 759 bps year-on-year given the stark contrast in the cost of inputs consumed in the two quarters, as pricing interventions in the core portfolios’ could only partially alleviate the inflationary pressure, the company said. However, operating leverage benefits reduced the drop in EBITDA margin to 522 bps year-on-year, which stood at 19.0% in Q1FY22," the company said. EBITDA, or earnings before interest, taxes, depreciation, and amortization was up 3% at Rs481 crore.
Analysts tracking the company said gross margins were a disappointment for the second consecutive quarter.
“Marico sales were marginally ahead of our expectations but EBITDA was well below our estimates. Gross margins were a disappointment versus expectations—this is second consecutive quarter where both gross and EBITDA margins have disappointed versus expectations," said Abneesh Roy, executive director, institutional equities, Edelweiss Securities.
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The 31% sales growth was aided by price hikes as well as volume growth and a soft base, he said.
Copra prices were down 13% sequentially in Q1, the company said. However, covid-19 led disruptions and major weather anomalies in key growing regions led to sustained inflation in global vegetable oil prices adversely impacting input costs.
Marcio expects prices to be volatile in the short term.
The company’s Saffola franchise comprising refined edible oils and foods, recorded a 24% volume growth and 60% growth in value terms. Saffola edible oils delivered low double-digit volume growth during the quarter. Meanwhile, Saffola foods grew by more than 100% in value terms during the quarter. In-home consumption of foods helped the company’s branded oats business report a 59% value growth in Q1FY22.
Despite the restrictions in mobility—Marico’s core Parachute hair oil grew by 12% in volumes in Q1FY22. The Beardo franchise is on course to exit the year at a run rate of ₹100 crore, the company said.
“Unlike the first wave, the pandemic affected deeper pockets of the country, but business was not as disrupted as in the last year given that supply chains were able to weather localized and staggered lockdowns and retail stores operated for certain number of hours during the day," it said.
The company said rural growth moderated but is still outpacing urban.
Marico will continue to prioritize “volume-driven growth" and franchise expansion in the medium term, said Saugata Gupta, the company’s MD and CEO. “The core portfolios continued to deliver good growth in the Indian business, while the new launches in foods are rapidly gaining scale. Each of international businesses also recovered well on a year-on-year basis, thereby reaffirming stable medium-term growth prospects," Gupta said.
The company’s international business posted a broad-based recovery relative to the varying levels of impact in each of the markets in the base quarter.
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