Marico hints price hike in Parachute; Q2 net falls to 9.4%

FMCG firm Marico today hinted at a price hike on its flagship brand 'Parachute' hair oil to offset the rising pressure on the margins and warned of further fall in margins in the next few quarters.

"In Parachute, we might go in for price increase in the near future. It may not be a large increase," Marico chief financial officer and chief human resource officer Milind Sarwate told PTI here. "Our focus is to grow volume and price increases may not do justice to that. But depending on the situation, we may take price increases from time to time," he added.

On the back of a 100 basis points fall in the margin to 12% in the September quarter, Marico said, going ahead, the margins are likely to remain under pressure due to the high raw material prices.

"We may not see any easing of the cost push. Margins are likely to remain under pressure," the company said in a filing to the exchanges.

During the reporting, operating margin declined 100 basis to 12% during the quarter.

The firm today posted a 9.4% year-on-year rise in net profit at Rs 78.29 crore for the September quarter on rising sales that rose 25.6%, favourable forex and lower advertising expenditure. In the same quarter last fiscal, the company, which sells the Saffola brand of edible oil, among other products, had reported a net profit of Rs 71.56 crore. "We have been able to achieve profit that itself is an achievement. We had anticipated profit would be even lower than this, when we had sent a release in September. The fall of the rupee against the dollar towards the end of September also helped us, as we could save Rs 3 crore by reassessing our foreign assets," Sarwate said.

In September, Marico had said its profitability was likely to take a hit in the next few quarters due to surging raw material prices and the overall negative macroeconomic sentiment.

During the quarter under review, net sales rose 25.6% to Rs 974.45 crore from Rs 775.81 crore a year ago, while international business volume rose to Rs 241 crore. But the wellness arm Kaya continues to be in the red. The hair oils volume grew 26%, mainly boosted by strong volume growth of Parachute, which grew 10%, driven by small packs.

Sarwate pointed that raw material prices increased 4.7 percentage points and the company recouped some by controlling expenditure. "In case of advertising, we have brought about a reduction of 2.5 percentage points," he said. On the beauty and wellness arm Kaya, he said, "Kaya has shown good growth. The same store sales rose 16%. However, its profitability situation continues to be not so good. We expect that it will come out of the red next year at the earliest and not before that." During the quarter, Kaya recorded a revenue growth of 7% over last year and made a loss before tax of Rs 7.5 crore.

When asked about new products in its portfolio, Sarwate said, "We are prototyping flavoured oats in Chennai. As soon as they the prototyping comes of age, we should roll them out nationally." In terms of revenue, the consumer products business saw a growth of 27.21% to Rs 908.25 crore, while its skin- care segment had a revenue of Rs 66.19 crore, up 6.98% from the year-ago period.