Price hikes, volumes boost Marico Q3 cons net up 21% YoY

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Marico 's third quarter consolidated net profit rose 21% year-on-year to Rs 84.12 crore, helped by good growth in volumes and price hikes taken during the quarter to offset high input costs.

The fast moving consumer goods company's net sales during the quarter were up 29% at Rs 1,058 crore.

Analysts on average were expecting Marico to report a net profit of Rs 85 crore on revenue of Rs 994 crore, according to a CNBC-TV18 poll.

"The year witnessed steep inflation in prices of input materials...The company chose to pass on a part of the input cost increase to consumers," Marico said on Wednesday.

Cost of copra, which is a key input for coconut oil and accounts for 40% of Marico's raw material costs, was 4% higher than a year ago. Safflower and Rice Bran prices were up 28% and 33% respectively in the third quarter.

Marico's gross margin in the third quarter was at 25.2%, compared with 24.4% in the year ago quarter. PBDIT (profit before depreciation, interest, taxes) margin declined to 12.7% from 13.4%.

The company said margins were likely to remain under pressure as it may not see any easing of raw material costs in the short term. It has chosen to prioritise expansion of consumer franchise over expansion of margins to ensure long term growth and success, Marico said. 

The company's total expenses rose 9% year-on-year to Rs 954.92 crore.

Meanwhile, the Mumbai-based company saw a 20% volume growth in the quarter. Volumes in consumer products business were up 16%, Parachute coconut oil volumes rose 13% and Saffola refined edible oil volumes were up 15%. It saw 20% volume growth in value added hair oils.

International Business

Marico's International Business Group, which includes businesses in Bangladesh, Middle East and North Africa (MENA), South Africa and South East Asia, clocked a revenue of Rs 267 crore in the third quarter, up 39% from a year ago.

The IBG sales growth was boosted by International Consumer Products in Vietnam, a firm Marico had acquired in February 2011. The company expects its international business will continue to grow in "healthy" double digits.

Marico said it will focus on growing the categories, where it has significant market share, such as coconut oil in Bangladesh and male grooming products in Vietnam and the MENA region. It will also explore other countries as targets for expansion in the long term.

Kaya Skin Clinic

The company's Kaya Skin Clinics business reported a revenue of Rs 75 crore in the October-December quarter, with a same-store sales growth of 15%.

Kaya had a loss of Rs 14.5 crore at the PBIT level in the third quarter, but Marico feels it is showing early signs of recovery having posted growth at the same-store level for the fifth consecutive quarter.

"We feel reasonably confident that the business is on its way to record sustainable profit during fiscal 2014, if not earlier" it said.

Marico said it will remain cautious in Kaya's expansion plans, but will continue to add clinics at strategic locations to drive growth.

Marico shares closed up 2.1% at Rs 153.25 on NSE on Thursday.

Nachiket Kelkar
nachiket.kelkar@network18online.com