Marico Keeps Vigil On Margin As Inflation Concerns Loom Large
Food inflation and weak consumer sentiment, especially among the urban middle class, remains a concern, the CEO says.
(Marico's Parachute hair oil bottles on shelves inside an APMC market in Mumbai. Photo: Vijay Sartape/NDTV Profit)
Marico Ltd. has taken a cautious stance on margin as it expects a slight miss in its full-year guidance due to rising inflationary pressures.
"In the first half of fiscal 2025, we were able to hold the operating profit margins at 21.6% and we had earlier guided to maintain the margins in the second half as well," Chief Executive Officer Saugata Gupta said in a post-earnigns call on Tuesday. "However, the cost pressures at this moment seem to be higher than what we had anticipated, so we are expecting a 40–50-basis-point contraction at most."
A 25% spike in the prices of copra — a key commodity for the company — along with a sharp import duty hike in vegetable oils, squeezed margins. Marico's operating margin narrowed 50 basis points year-on-year to 19.6% in the second quarter of the current financial year.
Even as the Parachute Coconut oil maker will remain watchful on the margin front, Gupta is confident of delivering double-digit revenue growth for the domestic business in the latter half of the fiscal, aided by price hikes in Parachute and Saffola oil, and volume growth gradually picking up.
Marico has implemented a price increase of 15% in edible oils and 4% in coconut oil in response to rise in input costs. The company plans to take further price hikes across portfolio to offset the pressures on margins.
Echoing the commentaries of industry peers, such as ITC and Nestle, Gupta said that food inflation and weak consumer sentiment, especially among the urban middle class, remains a concern.
As soon as inflation cools down, we expect urban consumption of mass categories to recover faster.Saugata Gupta
Part of Marico's portfolio, which includes the diversified food, digital brands and premium personal care, caters to the upper-middle class and so "there is no slowdown in demand in these categories", Gupta said.
In the core categories, the management of the company expects a "gradual uptick" in demand, aided by continued government spending towards boosting rural economy, the festive season and through the company's ongoing initiatives to enhance the profitability of general trade.
"Most of our growth in the second quarter has come through online channels," he said. The general trade remains stressed, especially in the urban markets. "Price point remains a key factor for driving offline growth."
