Marico Q2 profit dips 3% on rising costs, currency swings

Net profit fell to ₹301 crore for the three months ended 30 September from ₹309 crore a year earlier, the company said in a statement on Friday.

Consolidated revenue from operations rose 3.1% to ₹2,496 crore from ₹2,419 crore a year ago, the company said. Domestic volumes grew 3% during the quarter. Operating profit rose 2% to ₹432 crore.

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As retail inflation held firm, the consumer packaged goods sector witnessed a volume decline for the fourth quarter in a row.

“Demand sentiment was largely on similar lines as the preceding quarter and improved slightly only in the last month of the quarter,” the company said in its earnings statement.

Marico is “hopeful“ of a much better performance in the core domestic portfolio in the fiscal second half. “We are confident of sustaining the strong and profitable growth trajectory in the international markets and staying resilient amidst uncertainty in some of the markets,” said Saugata Gupta, managing director and chief executive of Marico.

Marico’s India’s business revenue rose 1% to ₹1,896 crore from a year earlier. However, its key Parachute Rigids portfolio was down 3% in volume terms (down 11% in value terms) mainly due to muted consumption trends and sluggishness in loose to branded conversions.

“Marico has been witnessing sluggish growth in its hair oil product portfolio, given hair oil category is highly penetrated. Moreover, high inflation in edible oil resulted in volume contraction in the past few quarters,” analysts at ICICI Securities said.

A sharp decline in edible oil inflation would result in an improvement in gross margins in the coming quarters. “However, we remain cautious on hair oil (Parachute, value-added hair oils) sales growth prospects on a longer-term basis,” they added.

The company expects to deliver mid-single-digit volume growth in the second half of the financial year.

“Gross margin should improve sequentially from Q3 as copra remains in the soft zone, while the recent volatility in vegetable oils keeps us watchful,” the company said. It could take further price cuts in Parachute oils as copra prices stabilize, the company’s top management said in a post-earnings conference call on Friday.

Meanwhile, the divide between rural and urban growth widened during the quarter, with the former reeling under persistent inflationary and liquidity pressures. Modern trade and e-commerce grew in double digits.

The Saffola franchise, comprising refined edible oils and foods, grew by 4% in value terms during the quarter. Saffola Oils recovered to post high single-digit volume growth on a normalizing base aided by consumer pricing interventions in key packs, it said.