Mumbai: Packaged consumer goods manufacturer Marico Ltd recorded a 15.28% increase in net profit to Rs 85 crore for the quarter ended 30 June.
In a Mint poll of eight brokerages, analysts had estimated in the range of a 5.9% decline in net profit to a 19% gain.
Also read | Marico rides on high volume growth
Revenue climbed 33.2% to Rs 1,048.61 crore, beating the forecasts of all the eight brokerages.
Inflation pressure has hit most consumer businesses. For instance, the price of copra, which accounts for about 40% of Marico’s raw material cost, nearly doubled in the June quarter compared to a year earlier. Prices of safflower oil and rice bran rose 27% and 45%, respectively.
Marico passed on a part of the increase to consumers.
“After its 30% price increase, Marico reduced prices of its 50ml pack (14% price cut, 10% grammage cut) indicating volume growth pressures in smaller packs due to steep price hikes,” Motilal Oswal Securities Ltd said in a report.
The company also introduced budget packs of 175ml and 45ml at Rs 45 and Rs 12, respectively, to aid volume growth.
“The focus this quarter was to grow our consumer franchise and manage our volumes growth versus margin expansion,” said Milind Sarwate, group chief financial officer.
During the quarter, Marico’s operating profit margin shrunk to 11.93% from 13.41% in the year-earlier June quarter.
Its peers, Godrej Consumer Products Ltd and Colgate-Palmolive India Ltd, witnessed sharper declines in their operating profit margins.
India’s largest packaged consumer goods company, Hindustan Unilever Ltd, the maker of Surf detergent and Lux soap, will announce its earnings on Thursday.
Underlying volume growth for Marico in the June quarter over the year-ago period was 21%. About 7% of this was contributed by acquisitions and about 14% constituted organic volume growth, the company said in a statement.
Revenue increased across the company’s three business units. Its local consumer products business registered a 15% growth in volume terms—the contributors being Parachute coconut oil (in rigid packs) at 10%, Saffola oil at 15% and hair grooming oils at 32%.
Marico is also set to enter the instant noodle category. Sarwate said the company is testing a new instant noodles product under the Saffola Oats brand.
It will have to compete with similar products from Nestle Ltd (Maggi), ITC Ltd (Yippee Noodles), GlaxoSmithKline Consumer Healthcare Ltd (Horlicks Foodles), and Hindustan Unilever Ltd (Knorr Soupy Noodles).
Instant noodles is a Rs 1,500 crore category and is growing at a rate of 25-30%, said Anand Mour, vice-president, Indiabulls Securities, adding that he was surprised Marico chose to enter such a crowded segment.
“None of the new players have more than a 5% marketshare. They are yet not a threat to Maggi as they are still very small. But, collectively, they would have chipped away some share from Maggi,” said Anand Ramanathan, manager KPMG Advisory Services Pvt. Ltd.
Marico’s shares rose 6.42% to Rs 166.5 at the close of trading on the Bombay Stock Exchange on Wednesday, while the benchmark Sensex index fell 0.46% to 18,432.25.