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May 07, 2013, 11.26 AM IST | Source: CNBC-TV18

Emami sees margin expansion going ahead as input costs ease

Kolkata-based FMCG maker Emami is expecting its margins will see some improvement going ahead, helped by lower cost of raw materials like menthol.

Fast moving consumer goods maker Emami sees some expansion in margins going forward as prices of key raw materials like menthol have started softening.

It also expects strong volume growth across product categories, NH Bhansali, CEO, told CNBC-TV18 on Tuesday.

It is also likely to hike prices by around 4 percent in the current financial year, which will help margins.

Further, Bhansali said that Emami consolidated its international business in FY2013 and discontinued some low margin products in the international markets.

The company expects 15-20 percent growth in its international business in FY2014, he added.

Kolkata-based Emami reported a fourth quarter consolidated net profit of Rs 94 crore, up 30 percent year-on-year. Its consolidated net sales in Jan-March rose to Rs 451 crore from Rs 398 crore.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: Do you see further expansion in margins in the quarters to come on the back of lower raw material prices?

A: The prices have started easing down particularly for menthol and for few of packaging material also. The prices have recently started coming down. We feel going forward there will be some margin expansion from the cost as well, which has already happened last year. In 2012-13 also our cost of goods sold (COGS) had improved by 100 basis points and we expect some margin improvement in the next year as well.

Q: Your sales growth has been quite strong but there is a little bit of disappointment around the international performance. Could you just line out what you expect to see in terms of sales growth through the course of this calendar year even broken up between domestic and international contributions?

A: Last year was a year of correction and consolidation for international market. We had discontinued few of the brands last to last year, so there was an impact in the last year compared to the previous year.

We have discontinued low margin products like Bonita and Emita and also there was a correction in the distributors’ inventory holdings in few countries like Russia, Dubai, Middle East and Bangladesh. So on the primary level there has been a reduction in the sales but overall there was a moderate increase in the revenues.

I feel in the current year we will have good growth or a reasonable growth of around 15-20 percent in the international business.

Q: Is this canteen stores department (CSD) problem completely resolved now and what could you pencil in in terms of sales contribution from there now?

A: CSD last year increased by around 10 percent compared to the previous year. Currently the things are moving, there are orders and things are getting executed. So on CSD front also reasonable growth can be expected in the year FY13-14.

Q: Are you planning to take any more price hikes in any of your products on top of the 4 percent price hike you took last quarter?

A: Last year we had done judicious price rises and in January also we raised prices for few of our products. So we would be very selective in doing price rises. I think there could be a price rise of around 4-5 percent or so in the next fiscal.

Q: What about volume growth in particular? This time you did 13 percent volume growth, what are you expecting to see in the next quarter in terms of volume growth and what are the key categories where you expect to see expansion?

A: All the categories where we are present right from Boroplus Antiseptic Cream to Navratna oil, Fair and Handsome and Zandu Balm etc are all growing very well. In fact the penetration levels of all these categories are very low. We feel that good growth will continue to come in from existing brands itself and we would come out with few of brand extensions as well.  I feel there would be a good commensurate volume growth in the financial year 2013-14 as well.

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