FMCG major Marico expects double-digit revenue growth and mid-single-digit volume growth in the quarters ahead as the economy emerges out of the woods and life returns to normalcy, said Saugata Gupta, MD and CEO, Marico, while addressing investors after reporting second-quarter results.
“This will also translate into a healthy double-digit two-year CAGR in volume and we might also see a movement to a high-single-digit volume growth in the fourth quarter (Q4) if the consumption situation does not worsen in the country,” he added.
The company is hopeful of a strong performance in the quarters ahead even as it battles with sky-high inflation on several fronts.
“We believe that as long as we stick to fundamentals and adapt to the vagaries of the operating environment with agility and innovation, we can stay resilient and deliver 13-15 percent revenue growth over a medium-term on the back of 8-10 percent volume growth in the India business and a double-digit constant currency growth in the international business while keeping our operating margins above the threshold of 19 percent,” he added.
Performance in Q2
Marico reported a 22 percent year-on-year (YoY) jump in its revenue to Rs 2,419 crore in the second quarter ended September (Q2) as compared to Rs 1,989 crore in the year-ago period. The company’s net profit during the period grew by 8 percent YoY to Rs 309 crore as against Rs 285 crore registered during Q2 last year.
Marico’s India business delivered a turnover of Rs 1,870 crore, up 24 percent on a YoY basis.
Segment-wise, parachute Rigids grew by 7 percent in volumes in Q2FY22.
The company said the brand maintained its stronghold in the branded coconut oil market with the rigid packs gaining a volume market share of 180 bps (MAT Sep’21). While the Saffola franchise, comprising refined edible oils and foods, delivered 46 percent value growth, it added.
“Saffola refined edible oils was subdued mainly by trade destocking and partly due to lower in-home consumption. Saffola Foods grew by 70 percent in value terms on a year-on-year basis. The oats franchise continued to anchor the performance with a value growth of 36 percent in Q2FY22, led by penetration gains,” said Marico.
The company continues to witness high inflation in key several key commodities. While the company has taken cost-saving measures and even raised the prices of its products in the last few quarters, inflation continues to dent its margins.
The FMCG major’s gross margin improved sequentially by 140 basis points but was down 560 basis points YoY as edible oil and crude oil prices remained at elevated levels. EBITDA margin stood at 17.5 percent, down 210 bps YoY.
“EBITDA was up 9 percent YoY and recurring PAT was up 8 percent YoY. Reported PAT was up 17 percent, due to an exceptional item in the base quarter,” the company said.
Gupta, while addressing the investors cautioned that continued high inflation and global supply chain disruptions are the risk factors to watch out for.He said that despite the high inflation in fruit and vegetable oil costs, the company continues to introduce aggressive cost-saving measures and deliver profitable growth. However, though the gross margins will improve in Q3, the operating margins are expected to improve only by the last quarter of the financial year on the back of increased advertising and promotional spending, he added.