Marico may raise hair oil prices, Q1 profits jump 32%

Marico may raise hair oil prices, Q1 profits jump 32%

Mumbai: Personal care products maker Marico Ltd may increase prices of its flagship hairoil brand ‘Parachute’ during the current quarter, a senior official said on Wednesday.

“During the second quarter there could be a possibility of hiking prices but that will not happen across the will be on the larger packs of Parachute," Chaitanya Deshpande, EVP and head m&a and investor relations, told Reuters.

Marico has already taken prices up by 2-3% in its edible oil brand Saffola in the quarter ended June, he said.

The firm has seen prices of its key raw material copra, which accounts for 40% of its input costs, rise by 4% during the quarter, rice bran oil by 1% and HDPE (high density polyethylene) by 17%. Safflower prices, however, fell by 12%.

Marico further said it has set a capital expenditure of Rs750 million during the current fiscal.

“The proceeds will be used to set up a new edible oil refining plant, on regular capex and on our Kaya expansion in the west Asia," he said.

The firm in April had told Reuters it was setting up an edible oil refining plant in Himachal Pradesh.

It also plans to expand its overseas distribution to neighbouring countries from its hubs in the Middle East, Egypt and South Africa.

“From our base in Egypt we are looking at the north African rim like Algeria, Morocco....then from South Africa we are looking at countries like Botswana and Namibia," Deshpande said.

The firm expects its international business, which currently contributes to 23% of the firm’s revenues, to grow 20% per year over the next few years.

Earnings Growth

Earlier in the day, the firm posted a 32% jump in June quarter consolidated net profit to Rs737.4 million. Net sales rose to Rs790 crore from Rs697 crore in the same period a year ago.

A Reuters poll of brokerages had forecast a net profit of Rs705 million in the June quarter on net sales of Rs767 crore.

“Our numbers have been helped by a healthy 16% volume growth. However, our value growth was lower due to deflation in some input costs which the company chose to pass on to the consumer," Deshpande said.

Its flagship brands ‘Parachute´ coconut oil in rigid packs grew by 14% in volume whereas edible oil brand ‘Saffola’ rose by 18%.

“Our profits have also been helped by the effective tax rates which have come down after moving our businesses into tax-ree zones both domestically and overseas," he added.

The total effective tax rate stood at 18% and plans to maintain it at under 20% over the next two quarters.

Marico’s skin-care business under ‘Kaya’, posted revenues of Rs506 million, up 14% from a year ago, but posted a loss of Rs47 million at the profit before tax level.

“We are closing down 6 clinics in India and there is no expansion lined up in Kaya in India. We are only expanding Kaya in the west Asia now," Deshpande said.

It also plans to increase its skincare products under Kaya from the current 13% to 20% in the next 2 years.

Shares of the firm ended 0.32% up at Rs126.05 a share in a weak Mumbai market.