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Informist, Friday, Jan. 31, 2025

By Steffy Maria Paul

MUMBAI – Fast-moving consumer goods company Marico Ltd.'s consolidated net profit for the December quarter met analysts' estimate and its revenue managed to beat the Street's view. However, the hair oil maker's on-year growth in net profit for the quarter was the slowest in nine quarters.

Marico reported a consolidated net profit of INR 3.99 billion for the latest quarter, up 4% from INR 3.83 billion a year ago. The company reported a consolidated revenue of INR 27.94 billion for the quarter, up 15% from INR 24.22 billion a year ago. The Street had estimated the company would post a consolidated revenue of INR 27.45 billion for the quarter. Sequentially, Marico's consolidated net profit fell nearly 5.7%, while the consolidated revenue was up 5%. 

The company's growth in total expenses outpaced the rise in its revenue, rising 17.7% on year, the most in 13 quarters. Raw material costs during the quarter were INR 12.83 billion, up 41% on year. This was the highest on-year growth in raw material costs in 14 quarters. The company's cost for the purchase of stock-in-trade rose 5.6% on year but fell 4% sequentially to INR 2.45 billion.

The company spent INR 2.93 billion on advertisements and promotions during the quarter, 19% higher than what it did a year ago. This was the second highest on-year growth in its advertisement expenditure in 14 quarters, after the 26% growth in the September quarter of 2023. 

At 1410 IST, shares of the company shed some gains and were at INR 673.80 on the National Stock Exchange, up 0.3%. Before the results were announced, the stock was up 1.6% over its previous close. The stock eventually closed at INR 670.65, down 0.2%. The company declared interim dividend of INR 3.5 per share and set Feb. 7 as the record date. 

For the nine months ended December, the company reported a consolidated net profit of INR 12.86 billion, up 10.6% on year. For the same period, the consolidated revenue was INR 73.75 billion, up 10% on year. 

Marico's revenue from its domestic operations for the December quarter was INR 21.01 billion, up 17% from a year ago. This was led by price hikes in core portfolios undertaken to counter the sharp rise in input costs, Marico said.

The company's domestic volumes rose 6% on year. Domestic volumes reported an uptick on a sequential basis and were underpinned by a resilient performance across core portfolios and the scaling-up of new businesses, Marico said. 

The company's consolidated earnings before interest, tax, depreciation, and amortisation for the quarter stood at INR 5.33 billion, up 4% on year. Its consolidated EBITDA margin for the quarter fell 210 basis points on year to 19.1%. "While the sharper-than-anticipated rise in input costs will have some transient impact on margins in the near term, we remain biased towards driving top quartile volume growth and double digit revenue growth in the near and medium term," Managing Director and Chief Executive Officer Saugata Gupta said in the press release.  

Among channels, modern trade and e-commerce, including quick commerce, continued to lead with high double-digit volume growth, while general trade was flattish, the company said.

Marico expects the upcoming Union Budget, which will be tabled on Saturday, to stimulate consumption, and government schemes, rise in minimum support prices, and a good harvest to aid the ongoing recovery in rural demand. The EBITDA margin of the domestic business was 19.6%, down 320 bps, and that of its international business was 27.1%, up 100 bps on year. 

Its revenue from international operations for the latest quarter was INR 6.93 billion, up 10% on year. The international business grew 16% in constant currency terms. The company's operations in Bangladesh grew 20% in constant currency terms during the quarter. The company expects its operations in the region to maintain its double-digit momentum. Operations in West Asia and North Africa grew 35% in constant currency terms on account of broad-based growth in the Gulf region and Egypt. Its operations in South Africa rose 17% in constant currency terms. However, the company's operations in Vietnam fell 1% during the quarter in constant currency terms. 

Parachute coconut oil, which makes up 33% of the company's domestic revenues, reported 3% growth in volumes and 15% growth in value during the quarter. Revenue growth in the segment was aided by pricing hikes during the year. The brand has taken another round of price increases, 5% at brand level, towards the end of this quarter as the company expects copra prices to remain firm in the near term, Marico said. 

Saffola Edible Oils, which contributed 18% to the company's domestic revenues, reported 24% value growth led by pricing interventions taken over the last few months and low single-digit volume growth amid a sharp rise in vegetable oil prices.

The value growth of value-added hair oils portfolio, which makes up 19% of the domestic revenue, fell 2%, showing signs of recovery on a sequential basis. The middle and premium segments fared relatively better and the company expects gradually improving trends in the segment on the back of investments, brand activations, and gradually improving trends in rural consumption sentiment, the company said.

The foods segment reported value growth of 31% during the quarter. Marico aims to achieve double-digit EBITDA margin in digital-first brands by 2026-27 (Apr-Mar). Its men's personal care and grooming brand Beardo is on track to deliver double-digit EBITDA margin in the current financial year, the company said. It expects the share of the foods and premium personal care portfolio in its domestic revenue to grow to 25% by FY27. 

Marico expects the firmness in commodity prices to continue in the near term. "We will continue to prioritise the expansion of our consumer franchises in the current environment, while judiciously leveraging the pricing power of these franchises in the near term," it said in the press release. In the medium term, the company aims to deliver double-digit revenue growth in the domestic core portfolio and double-digit constant currency growth in the international business. Marico expects its operating margin to expand over the medium term on account of leverage benefits and premiumisation of portfolios across both the domestic and international businesses.  End

Edited by Avishek Dutta

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