Though Q2 revenues were up a smart 30%, growth rates may slow down going forward.
Marico’s topline growth was robust in the September quarter with a consolidated revenue growth of 30 per cent y-o-y to Rs 603 crore, building up on the 28 per cent growth reported in the June quarter. Volume growth contributed 11 per cent, inorganic growth 3 per cent, and price hikes 16 per cent to the overall revenue numbers.
In the September quarter, major brands such as Parachute, Nihar and Saffola reported volume growth of 12 per cent, 10 per cent and 9 per cent, respectively. Marico also increased product prices during the quarter, notably Parachute prices were increased by 5-6 per cent to ward off the rising input costs. However, it was not able to completely offset the higher cost of raw materials such as copra and sunflower oil that went up 30 and 20 per cent y-o-y, respectively. This caused the operating profit margins to decline by 180 basis points y-o-y to 12.2 per cent.
The company included a Rs 7 crore forex loss due to rupee depreciation in other expenditure. Adjusting for that, its operating profit margin would have been 13.4 per cent, just 60 basis points lower y-o-y. Operating profits were also affected by the increase in employee costs due to the acquisition of a South African company and the Kaya expansion.
There was some respite on the cost front as there were no major new product launches or re-launches in the quarter. Thus, advertising and sales and promotions cost reduced by about 10 per cent y-o-y to Rs 54 crore. However, the company said that it would not be cutting ad spends as it plans to further strengthen its brand image. For future growth, the company is creating a portfolio of heartcare products under the Saffola brand. The Marico management is circumspect about the near future and estimates a drop in the growth rate due to inflationary pressures.