Marico Q3 Results: Profit Rises 16%, Revenue Dips On Weak Rural Demand
The net profit of the maker of Parachute hair oil rose 16% over the previous year to Rs 386 crore in the quarter ended December.
Marico Ltd.'s third quarter profit rose in line with estimates, but revenue fell for the third straight quarter impacted by weak rural demand, lower pricing of edible oil and currency depreciation in select overseas markets.
The net profit of the maker of Parachute hair oil rose 16% over the previous year to Rs 386 crore in the quarter ended December, according to its exchange filing issued on Monday. That compares with the Rs 367.8-crore consensus estimate of analysts tracked by Bloomberg.
Marico Q3 FY24 Highlights (Consolidated, YoY)
Revenue dipped 2% to Rs 2,422 crore, as against a forecast of Rs 2,473 crore.
Operating profit rose 12.5% to Rs 513 crore, as compared with the estimate of Rs 514 crore.
Margin widened to 21.2% versus 18.5%. Analysts had estimated it at 20.8%.
India business revenue fell 3.13% to Rs 1,793 crore as pricing corrections were yet to anniversarise.
International business posted 6% constant currency growth, dragged by transient macroeconomic headwinds in Bangladesh. The region registered 6% decline. Among other regions, South Africa grew 33%, followed by MENA (26%) and Southeast Asia (4%).
Marico's underlying domestic volume growth in the October-December quarter stood at 2%—the slowest pace so far this quarter. Volumes grew 3% each in the preceding two quarters.
"We have delivered a competitive performance in a volatile operating environment," said Saugata Gupta, managing director and chief executive officer at Marico.
Marico, which has been flagging weaker rural demand due to impact of higher inflation, reiterated that the trend has still not changed, with rural “offering little to cheer”. The mass home and personal care categories aligned closely with the rural demand trajectory, Gupta said. The packaged foods maintained its growth trajectory, given its high urban salience.
In addition, constraints on liquidity and profitability in the general trade channel remained an overhang for the consumer goods sector, while alternate channels continued to fare well. In response to the extended slowdown in general trade, Marico alleviated return of investment challenges faced by channel partners, and Gupta expects this initiative could potentially pave the way for a structural recovery.
The company attributed the decline in volume partly to the stock reduction undertaken across key portfolios as part of its initiative to support general trade distributors.
"Offtakes remained healthier across key portfolios, with over 75% of the business either gaining or sustaining market share," Marico said.
Categorywise Performance
Parachute coconut oil, comprising 34% of domestic sales, reported a 3% volume growth, while value growth remained flat.
Saffola edible oils, accounting for 18% of domestic sales, reported a mid-single digit volume decline on a high base and extended sluggishness in trade sentiment, while value growth dipped 26%.
Value-added hair oils, comprising 20% of domestic revenue, exhibited divergent trends with bottom-of-the-pyramid segments remaining subdued, while mid and premium segments grew in mid to high single digits. It rose 3% in value terms.
Foods continued its steady growth trajectory, with 18% value growth.
The digital-first portfolio clocked an exit annual rate of return of Rs 400 crore in Q3.
Among key inputs, Marico said copra prices stayed at lower levels but exhibited some upward bias. Ricebran oil exhibited lower volatility and crude derivatives like liquid paraffin and HDPE also trended downwards.
With macro indicators signalling positivity, more favourable consumer pricing across categories as well as continued government spending, Marico said it "remains optimistic" of a gradual uptick in consumption trends over the next 4-5 quarters. It expects revenue growth to move into positive territory in Q4 of the current fiscal as the base catches up.
Gross margin is expected to expand by 450-500 bps on a full-year basis, higher than earlier envisaged, owing to sustained input cost tailwinds and a favourable portfolio mix, Marico said.
"Investments towards brand-building will continue to remain a key thrust area towards strengthening the equity of the core and new franchises and driving long-term growth," the company said, projecting operating margin to expand by 250 bps in FY24.
Shares of Marico closed 1.7% lower before the results were announced, as compared with a 1.8% gain in the broader benchmark Nifty 50.
