Marico optimistic about recovery in rural demand and growth prospects

The company said anticipated pickup in rural demand remained elusive, dampening overall growth prospects

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Marico Ltd. said on July 5 that despite lack of clear signs of improvement in demand trends during the quarter, the sector remained stable, with urban markets maintaining a steady performance, in their quarterly update of Q1 FY24.

Anticipated pickup in rural demand remained elusive, dampening overall growth prospects. However, factors like moderating headline inflation, a hike in Minimum Support Prices (MSPs), easing liquidity pressures, and the forecast of a near-normal monsoon will likely pick up rural demand, Marico said.

The domestic business faced challenges during the quarter, including significant trade destocking in Saffola Edible Oils due to falling vegetable oil prices, as well as channel inventory adjustments in core portfolios. As a result, domestic volumes saw low-single-digit growth, with minor volume drop in Parachute Coconut Oil, low double-digit volume growth in Saffola Edible Oils, and a flattish quarter for value added hair oils.

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Analysts at Nuvama reported that consolidated revenue is likely to decrease 2-3 percent year-on-year, dragged by pricing interventions in key domestic portfolios last year and further pricing drops in Saffola Edible Oils. The company is expected to record an 11 percent year-on-year growth in profits while domestic volumes will be up 2-3 percent year-on-year, the research agency added.

“Among the newer portfolios, Foods continued its strong run, while Premium Personal Care (including Digital-First portfolio) remained steady,” Marico said in an exchange filling.

Marico’s International business maintained its healthy growth momentum as it delivered high single-digit constant currency growth, with most geographies exhibiting resilience in a volatile global operating environment, Nuvama noted.

Looking ahead, the FMCG firm expects a visible pickup in primary volume growth from the coming quarter, driven by sustained healthy trends in offtakes, market share, and penetration across key franchises.

Interventions in key domestic portfolios and further pricing drops in Saffola Edible Oils, the company anticipates a material expansion in gross margin. Favorable copra prices and sharp declines in edible oil prices, combined with firm crude derivatives, contribute to this expectation. Increased advertising and promotion (A&P) spend align with the company's strategic brand-building focus, while operating margin expansion is set to drive double-digit growth in the bottom line.

Parachute oil maker Marico reported an 18.6 percent surge in consolidated net profit at Rs 305 crore for the Jan-March 2023 quarter. The company’s revenue from operations grew 3.6 percent year-on-year to Rs 2,240 crore for Q4 2023.