Marico Q3 net beats forecast; plans price hike

Marico Q3 net beats forecast; plans price hike

Mumbai: Personal care products maker Marico Ltd posted a forecast-beating 12% jump in the December-quarter net profit as volume growth steered earnings, sending its shares up nearly 4%, but margins were strained due to a surge in input costs.

Marico posted net profit of 69.53 crore from 62.2 crore for the December quarter. Net sales grew 22% to 820 crore.

A Reuters poll of brokerages had forecast a net profit of 69.18 crore on net sales of 791 crore Indian fast moving consumer good (FMCG) firms have been battling strong inflation in commodity-sensitive categories as prices of agri and crude related inputs surge.

“There has been a margin contraction of almost 250 basis points.That is after facing a huge jump in copra prices of almost 62%," Milind Sarwate, chief of finance, HR and strategy said.

Copra is one of the key raw materials which accounts for 40% of the firm’s input costs.

Profit from operations before interest and exceptional items rose 3% at 851 crore. “The pressure on margins in the next quarter will continue as I do not expect prices to come down anytime before the first quarter of next fiscal," Sarwate said.

Price hikes

The firm plans to hike prices of its flagship hair oil brand ‘Parachute´ by 8-9% in late January, Sarwate said. It has so far raised the price of Parachute by 35% since the start of the fiscal year due to a severe spike in key raw materials.

It does not plan a price hike immediately in other product categories such as edible oils.

An overall volume growth across businesses steered earnings during the quarter.

“We have witnessed an overall volume growth in the business. The domestic business has seen a volume growth of 10%, international business of 25%," Sarwate said.

The international business, which comprises of 23% of the firm’s turnover, grew by 28% over last year.

The firm expects to maintain a growth of 25% from its overseas business in the coming quarters, Sarwate said.

Marico’s skin-care business under ‘Kaya´ also witnessed a 40% jump in revenues to 62 crore in the quarter and posted a profit before tax of 3.8 crore , boosted by the acquisition of Singapore-based skin care firm Derma Rx in 2010.

Same store sales for Kaya has grown 8% this quarter, reversing the trend in the last few quarters.

Shares of the firm ended up 2.53% at 127.65 rupees in the Bombay Stock Exchange.