Home / Companies / News /  Marico reports 14% jump in March quarter profits, inflationary pressures prompt

NEW DELHI : Packaged consumer goods company Marico Ltd, on Friday reported a 14.07% jump in quarterly net profit as its foods business in India, including oats, honey and cooking oil, reported strong growth. However, inflationary pressures impacted gross margins. The company makes edible oil and oats under Saffola and Parachute hair oil, among a range of products.

The magnitude and reach of the ongoing second covid wave in India remain "concerning", Marico said in its earnings release. The extent and duration of the impact of the current covid wave on business environment and consumption cannot be predicted, it said. "We have witnessed some impact on business in the last 10 days of April and will continue to track the situation as it evolves," the company said.

For the three months ended 31 March, the company reported Rs227 crore in net profit. The same stood at Rs199 crore in the year-ago period. Revenue from operations surged 35% to Rs2,012 crore from the Rs1,496 crore it reported in the year-ago period, the company said. Domestic volumes were up 25%, exceeding analyst expectations.

It also took price hikes across key brands—to the tune of 4% in its core Parachute hair oil portfolio, besides a price hike in edible oils.

“In Q4, market prices of copra were higher by 25% year-on-year mainly due to leaner supplies and lower coconut to copra conversion. The company expect prices to cool off from Q1FY22 as the peak season sets in," it said. Marico also reported “significant" inflation in global vegetable oil prices.

It took further price hikes in select brands in the current quarter. "Within the quarter, the company witnessed sequential hardening of input prices in March, which has necessitated further pricing action in Q1FY22 in select core brands," it said.

Most of the company’s core portfolios kept up the momentum seen over the last couple of quarters.

The company’s foods portfolio led by oats—crossed Rs300 crore in turnover in FY21, reinforcing Marico’s plans to continue expanding its play in the organized packaged foods market. During the quarter the company expanded its presence in foods with Saffola Oodles noodles.

“The foods portfolio grew 134% in value terms in Q4 and crossed Rs300 crore in turnover in FY21. The base oats franchise grew by 84% in value terms backed by increased penetration and market share gains. The new immunity boosting, and plant-based protein offerings launched this year have seen encouraging trends in their launch markets," it said.

Hair oil Parachute Rigids grew 29% in volumes in Q4, albeit on a low base, despite the price hikes and pullback of consumer offers to counter a part of the input cost push.

Saffola edible oils reported a 17% volume growth in the March quarter despite a strong base quarter where it reported 25% volume growth.

“As macroeconomic indicators signalled some positivity for most of the quarter, the company witnessed strong momentum in each of the core portfolios of the India business while steadily strengthening its play in foods through innovation. However, a part of the optical growth was also due to a lockdown-affected base (however relatively stronger than most sectoral peers) and partial normalization of the historical skew in Q4 and Q1 revenues," it said.

During the quarter, Marico amped up its advertising and sales promotion spends that grew by 35% year-on-year. Rural markets surged ahead of urban for the company. “Rural continued to lead the way in traditional trade, growing at 1.8x of urban e-commerce," the company said.

Marico said gross margin was down 517 bps owing to severe input cost pressure, as pricing interventions in the core portfolios were not commensurate to the inflation. Earnings before interest, tax, depreciation, and amortization was up 13% year-on-year on the back of tight cost controls.

“Marico witnessed a strong growth during the quarter, mainly on the back of low base quarter. However, food and Saffola witnessed strong growth despite higher sales in base quarter," said analysts at ICICI Securities.

Analysts expect growth momentum in these categories to continue. “Given, the sharp rise in commodity prices, the company has not taken any price increase to pass on full impact of raw materials….we believe the company would be able to recoup operating margins in the next two quarters with small price hikes, expected dip in commodity cost and rationalization of overhead spends. we remain positive on the company," they said.

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