Monsoons will boost growth in H2FY14: Emami

While rural demand has dipped from 18-19 percent to 12-13 percent in Q1, N Krishna Mohan, chief executive officer, sales, Emami, says better days lie ahead of the company.

Speaking to CNBC-TV18 on the company’s performance and plans ahead, Mohan says the good spell of monsoon seen through-out the country will boost sales in Q3 and hence, expects a good growth in H2FY14.

Also read: Emami Q1 net profit rises 30% to Rs 61 cr

Additionally, Mohan says he will continue to invest heavily in ad-spend and brand building.

“We have not taken any measures to reduce the brand investments, we will continue to invest in our brands because we feel that is going to be a long-term impact for us. At this stage I don't think we are negating any of the marketing investments,” he explains.

Below is the edited transcript of Mohan's interview to CNBC-TV18.

Q: Over the last three-six months what has been the ground situation in terms of rural consumption, have you seen signs of improvement over there?

A: I think the last three-six months have been a little different than what happened over the last 18 months. There is generally a little bit of slowdown in the rural demand. I won't call it a slowdown in rural consumption as much as what happened on the urban. But there has been a distinct difference that we have noticed in the consumption patterns in rural over the last five-six months.

We were bullish over the last two years and we have done well on the rural segment. I think both the base effect and also the slowdown effect had some impact during the first five months of this financial year.

Q: Could you just elaborate on the consumption patterns and the distinct consumption patterns that you referred to between urban as well as rural markets especially in this fiscal.

A: All of us know that there has been a downturn as far as the growth rates are concerned, as far as the top-lines are concerned over the first quarter of the year. What we noticed is that in certain segments or certain categories, the rural segment which was going with high growth elements have come down reasonably to a little lesser level than what we have seen. So, the growth rates have come down. But they are far higher than what we have been delivering in the urban markets as usual. There is a difference between the rate of growth has come down in the rural markets.

Q: What kind of urban slowdown in particular have you seen and how would that reflect in this quarter’s numbers?

A: I won't give a number to this quarter at this point, but we have been growing at 18-19 percent over the earlier years that has come to 12-13 percent in the first quarter of the year. We hope to maintain the same levels but that itself is a little lower than what our expectations would have been in this market.

Q: What is the overall volume and pricing mix for Q2 versus Q1?

A: I don't want to disclose Q2 numbers. In Q1 we had seen about 7 percent volume growth and 5 percent value growth so that put together around 12 percent of value growth that we had.

Q: Will Q2 be better than that and is there any price hike you can undertake?

A: We haven't taken any drastic price hikes in Q2. I don't want to predict on the results of Q2 yet, we have the whole of September running through. We have some favourable indicators. The monsoon has been good but usually the effect of monsoon whether good or bad come from Q3. So, we are more bullish about the second half of the year and I feel the rural consumptions, even if they have come down, they are temporary in nature and we will see a bounce back as far as the rural consumption is concerned.

Q: You have one of the highest ad spends in the industry proportionate to your sales. Is that likely to continue at about 16 percent of your sales?

A: We would continue to invest on our brands. We have not taken any measures to reduce the brand investments, we will continue to invest in our brands because we feel that is going to be a long-term impact for us. As far as what other measures we need to take if at all these business results do not match our expectations. But at this stage I don't think we are negating any of the marketing investments.

Q: What about the international business, what kind of growth rates are you seeing there compared to the domestic business?

A: We are growing about 20 percent on the international markets and we hope to continue the same growth rates in the international market for this financial year.