Fast moving consumer goods (FMCG) company Marico Ltd posted a net profit of Rs 238 crore for the quarter ended June 30, a growth of 28 percent year-on-year, aided by strong operating margins arising from lower input costs, volume and value growth in sales in India and abroad as well as one-off gains from the sale of its stake in an international subsidiary.
The Harsh Mariwala-led company posted a 10 percent growth in revenues at Rs 1,783 crore in the same period. Marico’s earnings before interest, tax, depreciation and amortisation (Ebitda) stood at Rs 325 crore in the April-June quarter, up 22 percent year-on-year. Ebitda margins stood at 18.2 percent, 180 basis points higher compared to the corresponding period last year. One basis point is one-hundredth of a percentage point.
The company, which makes and sells leading consumer products such as Parachute coconut hair oil and Saffola refined edible oil, witnessed an overall volume growth of five percent in sales over the year earlier.
Overall, volume and revenue growth was primarily aided by a six percent growth in sales volumes in India. In value terms, the domestic business (which accounts for 78 percent of its consolidated turnover) recorded a growth of 12 percent, while the international business grew by four percent.
One of the major reasons for value growth in India FMCG sales outstripping volume growth was a concerted effort on Marico’s part to move towards premiumisation of its hair oil products portfolio, which earn higher margins.
The operating margin of the India FMCG business during the June quarter was 21.6 percent.
“The company believes that an operating margin for the domestic business in the band of 17 percent to 18 percent is sustainable in the medium term,” said Marico’s post-earnings statement, which was issued on Wednesday. “Higher operating margins can be attributed mainly to gross margin expansion led by softer input costs.”
Prices of most key commodities that Marico uses as raw material for its FMCG products such as copra (derived from coconuts), rice bran oil and liquid paraffin fell during the quarter, aiding the company’s profitability.
“The company derives comfort and confidence from the pricing power its brands enjoy,” Marico said in its statement. “The company would continue to exercise a bias for franchise expansion as long as margins remain within a band and do not fall below a threshold at the overall business level.”
Marico also said that it received an exceptional income of Rs 9 crore during the quarter as a result of its wholly owned Vietnamese subsidiary divesting its entire stake in a step-down subsidiary called Beauté Cosmétique Societé Par Actions.