Marico Q4 profit rises 26% to Rs169 crore

Marico’s consolidated revenue for the fourth quarter stood at Rs1,322 crore, up 2% year-on-year

Shares of Marico Ltd ended 1.30% up at Rs319 on BSE on Tuesday. Photo: Pradeep Gaur/Mint
Shares of Marico Ltd ended 1.30% up at Rs319 on BSE on Tuesday. Photo: Pradeep Gaur/Mint

Mumbai: Edible oil maker Marico Ltd said its consolidated profit after tax rose 26% year-on-year to Rs169 crore in the fourth quarter, as its business is returning to normal after demonetisation.

Marico’s consolidated revenue for the quarter was at Rs1,322 crore, up 2% year-on-year and just short of the Rs1,368.7 crore estimated revenue as per a poll of 26 analysts by Bloomberg.

The company’s total consolidated annual revenue was at Rs5,936 crore for FY16-17, a 1% decline, while PAT stood at Rs799 crore, up 12% year-on-year.

“I am fairly satisfied with the strong comeback during the quarter. The core is stronger with gains in market shares,” managing director and chief executive Saugata Gupta said in a press statement.

At its board meeting on Tuesday, Marico appointed Rishabh Mariwala, son of founder and chairman Harsh Mariwala, as additional non-executive director. The appointment will need shareholder approval at the annual general meeting scheduled for 1 August, 2017.

Marico’s India business grew 10%, accounting for 77% of the company’s total turnover in FY16-17. The growth came from Marico’s Parachute oil bottles called “Parachute Rigid” whose volumes grew 15%.

“Going forward, the volume growth in Parachute Rigid is likely to remain in the range of 5-7%,” Marico said in a stock exchange filing. “The company has finally taken the prices up by 8% in March 2017.”

Marico added that it may have to increase coconut oil prices as prices of copra, the dried coconut kernel from which oil is extracted, continue to increase. In the fourth quarter, copra prices were up 46% year-on-year, the company said in its stock exchange filings.

“The impact of demonetisation looks behind them because they did not take relevant price increases,” an analyst with an equities brokerage firm said, requesting anonymity.

However, the impact of demonetisation lingered on Marico’s annual rural revenues for FY16-17, which fell 6% due to bad monsoons in the two preceding years and pressure on consumer spending following the government’s decision in November 2016 to ban high value currency notes.

Marico said demonetisation also continued to affect its “youth brands” business that comprises hair gel and deodorant brand Set Wet and leave-in conditioner brand Livon. The portfolio declined 6% in value this quarter.

In the third quarter of FY16-17, Marico had reduced its advertising and marketing budget by 11% as it struggled to maintain margins after demonetisation hurt consumer spending. “The 26% increase in PAT was also due to substantially lower ad spends,” the analyst quoted above said.

In the fourth quarter, the company’s advertising spends were “held back” at 8.4% versus 12.5% a year before. “(This) also led to deferral of new product launches to H1 FY18”, Marico said in the filing.

However, while demonetisation may be left behind, Marico is anticipating short-term pressure with GST being implemented this July.

“As we enter FY18, we are acutely conscious of the challenges ahead,” Gupta said in the statement. “GST, the biggest indirect tax reform is round the corner. While in the long run, it will be beneficial for organized players, it will bring near-term uncertainty that may disrupt trade in H1FY18.”

“Things will be slow for the entire FMCG sector as they begin implementing GST in the first half of FY17-18,” the analyst quoted above said. “Marico will not be an exception.”

Shares of Marico Ltd ended 1.30% up at Rs319 on BSE on Tuesday.

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