Marico Q2 profit jumps 18% to Rs 218 cr, volume growth stands at 6%

Marico's operating profit margin contracted 85 bps to 16 percent YoY due to higher copra prices.

Published: Nov 1, 2018

Moneycontrol News

FMCG major Marico's second quarter net profit grew by 18 percent year-on-year to Rs 218.3 crore despite weak operating margin due to higher copra prices.

Profit in corresponding period last year stood at Rs 185 crore.

Revenue from operations increased 19.6 percent year-on-year to Rs 1,836.8 crore in quarter ended September 2018, with an underlying volume growth in the India business (as well as overall) of 6 percent against 8 percent year-ago.

The volume growth lower than the medium term aspiration was largely due to a significant decline in CSD sales, the company reasoned.

"While overall consumption trends seemed normal, volume growth in the India business was dampened by a double-digit volume decline in canteen stores department (CSD) sales. Underlying volume growth ex-CSD was 7 percent," Marico said.

The company further said value growth for the quarter was driven by price hikes taken in the core portfolios to counter the input cost inflation over the last year.

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International business posted a broad-based constant currency growth of 11 percent, led by volume growth of 8 percent YoY. Vietnam, which was lagging for over a year, bounced back to double-digit growth on a constant currency basis.

At operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) grew by 13.5 percent to Rs 294 crore, but margin contracted 85 bps to 16 percent YoY due to higher crude oil prices.

The company said pressure on margins was gross margin led due to consumption of higher cost copra inventory during the quarter and inflation in other commodities, which was partially offset by price hikes and operating leverage benefits.

But Marico retained its full year margin guidance at 17-18 percent.

"The India business operating margin (before corporate allocations) was at 18 percent in Q2FY19 against 18.5 percent in Q2FY18. Advertising and promotion spends perked up during the quarter," the company said.

Advertising & sales promotion spends increased to 9.6 percent of sales against 8.2 percent in Q1FY19 and was up 11 percent on a YoY basis.

The company said its FMCG business in India achieved a turnover of Rs 1,439 crore, a growth of 20 percent over the same period last year.

Parachute Rigids business grew by 8 percent in volumes and 32 percent in value. The company has a volume market share of around 59 percent in the segment.

Its Value Added Hair Oils (VAHO) segment had a softer quarter, registering 5 percent volume growth, due to a sharp decline in CSD sales while Saffola Edible Oils posted a volume growth of 5 percent.

The stock closed 0.86 percent lower at Rs 317 on the BSE after earnings.

Original Source: https://www.moneycontrol.com/news/business/earnings/marico-q2-profit-jumps-18-to-rs-218-cr-volume-growth-at-6-3117541.html