Mumbai: Personal care products maker Emami is targetting a 38% rise in net profit for the current fiscal on the back of robust growth in its flagship brands, a top official said.
It expects a profit of Rs235 crore in FY11 on sales of Rs1,300-1,350 crore, Mohan Goenka, director, told Reuters in an interview. It had a consolidated net profit of Rs170 crore on net sales of Rs1,040 crore in FY10.
Emami manufactures personal care brands such as ‘Fair and Handsome’, ‘Navratna Oil’, ‘Boroplus’ and ‘Sonachandi Chyawanprash’.
However, the firm currently faces a lot of pressure from rising input costs and that will force them to take price increases in the coming months, Goenka said.
“This quarter there was a lot of pressure on the input cost side. Our costs have increased by 2-2.5% for the quarter...If the prices don’t come down and continue at the same level then we might take a corrective price increase after 3-4 months,” he added.
Key raw material prices such as menthol and LLP (light liquid paraffin) have risen by 25 percent, pressuring margins of the firm, Goenka added.
Earlier in the day Emami posted a more than double growth in its June quarter net profit at Rs350 million on net sales of Rs242 crore during the June quarter, which rose by 28%.
“The profits jumped mainly because of the reduced interest burden,” Goenka said.
Last year in the June quarter the firm had an interest burden of Rs150 million compared to 10 million this year.
Emami also has plans to set up two new manufacturing units in Egypt and Bangladesh during this fiscal, he added.
“We will manufacture our entire range of products from these units...they will help us expand our base into the neighbouring countries,” Goenka said over the telephone.
The plants should be operational by March 2011 or first quarter of the next fiscal, Goenka said.
The firm has set aside a capital expenditure of Rs600 million for the current financial year, he said.
“Part of it will be used for the two new units. Our regular capex will take about Rs10-15 crore (100-150 million) and then we will use the remaining for setting up some warehouses in the country,” Goenka said.
Emami, whose revenue from international business rose 48% in the quarter, expects to aggressively expand its exports, Goenka said.
“We are aggressively focusing on the Middle East, Africa. We are already present in Egypt and Bangladesh via our exports from India and now we are setting up manufacturing bases there,” he added.”
Goenka said Emami’s international revenues, which last year stood Rs135 crore or 13%, is expected to go upto 15% in FY11.
The consumer goods maker is also planning to ramp up its domestic reach by concentrating on ramping up rural distribution. It is investing Rs70-80 million in ‘Swadesh,’ its rural distribution programme, Goenka said.
Emami said it plans to launch new products in the haircare space in this fiscal, pricing it at the mass level.
Shares of the firm ended up 5.62% at Rs457.05 per share in a weak Mumbai market.