NEW DELHI :
Mumbai-based fast moving consumer goods maker Marico Ltd on Friday posted a 17% jump in second-quarter consolidated net profit to Rs253 crore, on the back of benign input costs even as domestic demand continued to remain weak during the quarter, the company said in a filing to the stock exchange on October 25.
In the same quarter last year, the company posted a net profit of Rs216 crore.
Consolidated revenue from operations for the quarter dropped by 0.4% at ₹1,829 crore down from Rs1837 crore it posted in the year ago period on the back of a prolonged consumption slowdown across rural and urban India.
Domestic volume growth for the maker of Parachute hair oil and Saffola cooking oil stood at 1% for the quarter ended September 30, 2019.
“The company had a soft second quarter in the face of a challenging liquidity and consumption environment in the domestic market, especially in rural, while the international business provided some respite on the back of a robust performance in Bangladesh," Marico Ltd said in its statement.
The company’s India business—that accounts for 78% of Marico’s turnover—declined 3% in value terms to clock a turnover of ₹1398 crores “in the backdrop of an accelerated slowdown in consumption witnessed during the quarter," the company said.
The company said that in traditional retail channels in the country, constrained liquidity ailed both the urban and rural segments leading to correction in trade inventories. While sales in modern trade and e-commerce stayed strong.
In the September quarter EBITDA grew 16% to touch Rs353 crore, while EBITDA margin expanded by 270 bps. “Benign inputs costs in the domestic and Bangladesh businesses led to gross margin expansion by 561 bps on a year-on-year basis," the company said.
Its international business posted a constant currency growth of 9% in volumes to touch Rs431 crore largely led by strong growth in Bangladesh.
However, in India the company witnessed a slump in demand across most of its key categories.
The company’s flagship hair oil Parachute rigids declined by 1% in volume terms during the quarter. While, its edible oil brand Saffola posted 1% volume growth. “The brand continued to gain salience in modern trade and e-commerce, but healthy growth in these channels was offset by the sluggishness in general trade," the company said.
In the second quarter, Marico Ltd’s foods portfolio grew by 34% in value terms, led by Saffola Masala Oats. The company’s premium hair nourishment portfolio grew by 7% in volume terms, on the back of better performance of Livon Serums. Even its male grooming products portfolio that comprises of brands such as Set Wet hair products “declined marginally during the quarter."The company expects male grooming brands "to bounce back to growth in the second half, given the healthy trends in hair gels, hair waxes and the Set Wet Studio X range."
Advertising and sales promotion spends stood at 10.8% of sales, up 12% on a year-on-year basis.
Earlier this month in its quarterly update the FMCG company had warned investors that a progressively weak consumer demand sentiment had impacted growth across some of the categories it operates in. Its earnings on Friday reflected Marico’s earlier concerns.
In the near-term Marico does not expect a speedy recovery in the Indian households consumption.
The company said that it expects volume and value growth in FY20 to be in single digits as the near-term outlook continues to remain soft. However, over the medium term, “the company will aim to deliver 8-10% volume growth coupled with healthy market share gains, on the back of increased investment in the core portfolio, aggressive new product launches, distribution expansion and judicious pricing."