 "Rural sales add shine to Marico's Q1 show")
Marico's June quarter sales were driven by strong rural demand and price hikes. This quarter Marico has reported standalone FMCG number, excluding Kaya, which is why year-on-year (y-o-y) numbers are not comparable. Despite the slowdown, Marico beat the Street's estimates on both top line and bottom line. The company's consolidated (India and international business) sales grew 25 per cent y-o-y to Rs 1,623 crore in the June quarter and profit after tax grew 19 per cent to Rs 185 crore. The performance is commendable given that the company's profitability was under pressure as copra prices had risen sharply. Copra prices rose 130 per cent y-o-y, putting pressure on Marico's margins.
During the June quarter, Marico demonstrated its ability to walk the tightrope. Even as the percentage of raw materials as a percentage of sales rose 600 basis points y-o-y to 55 per cent of sales in the June quarter. The company managed to combat the cost push by raising prices and cutting back costs.
Despite the increase in prices, the company has not lost market share in price-sensitive segment such as hair oils. Parachute coconut oil in rigid packs recorded a volume growth of six per cent during the quarter.
The edible oil segment, too, fared well as Saffola clocked double-digit volume growth for the second consecutive quarter. The Saffola refined edible oils franchise grew 10 per cent in volume terms. In the healthy foods segment, Marico's Saffola Oats garnered 17 per cent market share in value terms. The demand for Marico's products is not restricted to any market. Marico's rural sales grew 33 per cent during the quarter, while modern trade (accounting for nine per cent of total sales) expanded 27 per cent. The international business, too, is showing signs of recovery as sales grew 10 per cent in constant currency.
Analysts believe the firm has managed to grow profitably during the quarter, despite pressures on margins. While India business operating margins fell 210 basis points to 18.8 per cent in the first quarter of FY15, margins in international business expanded 500 basis points to 18.2 per cent. This led operating profit (consolidated) to grow 20 per cent y-o-y to Rs 267 crore. Sachin Shah of Emkay Global said: "The stock is trading at 30 times its FY15 earnings, which is justified."
During the June quarter, Marico demonstrated its ability to walk the tightrope. Even as the percentage of raw materials as a percentage of sales rose 600 basis points y-o-y to 55 per cent of sales in the June quarter. The company managed to combat the cost push by raising prices and cutting back costs.
Despite the increase in prices, the company has not lost market share in price-sensitive segment such as hair oils. Parachute coconut oil in rigid packs recorded a volume growth of six per cent during the quarter.
The edible oil segment, too, fared well as Saffola clocked double-digit volume growth for the second consecutive quarter. The Saffola refined edible oils franchise grew 10 per cent in volume terms. In the healthy foods segment, Marico's Saffola Oats garnered 17 per cent market share in value terms. The demand for Marico's products is not restricted to any market. Marico's rural sales grew 33 per cent during the quarter, while modern trade (accounting for nine per cent of total sales) expanded 27 per cent. The international business, too, is showing signs of recovery as sales grew 10 per cent in constant currency.
Analysts believe the firm has managed to grow profitably during the quarter, despite pressures on margins. While India business operating margins fell 210 basis points to 18.8 per cent in the first quarter of FY15, margins in international business expanded 500 basis points to 18.2 per cent. This led operating profit (consolidated) to grow 20 per cent y-o-y to Rs 267 crore. Sachin Shah of Emkay Global said: "The stock is trading at 30 times its FY15 earnings, which is justified."