FMCG major Marico is expected to post better-than-expected mid-teens consolidated sales growth during the third quarter of FY25, led by pricing growth, said brokerage firms. Morgan Stanley said that the company will post Q3 revenue growth in mid-teens, ahead of the estimate as demand trends remained steady with improved rural consumption and stable urban growth. The Parachute-maker is expected to report sequential improvement in domestic volume growth, it added.
Another analysis report by Macquarie stated that Marico’s Q3 business update points to a sequential pickup in domestic volume growth during the quarter and a better-than-expected mid-teens consolidated sales growth. The EBITDA growth, it added, should remain largely in line at around 5 per cent.
Marico had issued a price hike at the end of Q3 due to copra inflation. In its December quarter business update, Marico had announced that with the copra prices remaining higher-than-expected, the company may post gross margin contraction on a year-on-year basis. “Among key inputs, copra prices remained firm at higher-than-expected levels and vegetable oil prices moved up during the quarter, while crude oil derivatives remained rangebound. The rising trend in input costs is expected to result in a higher-than-anticipated gross margin contraction on a year-on-year basis, as the Company continued to favour consumer franchise expansion in the current environment. We also sustained investments in brand building in line with our strategic intent to continually strengthen the long term equity of our franchises and accelerate diversification,” Marico said in a regulatory filing, while maintaining that as a result of this, the company is expected to record a modest operating profit growth on a year-on-year basis.
The FMCG major said that it will focus on its stated volume-driven revenue growth aspiration while remaining watchful on the margin front in the near term.
The consolidated business, it said, delivered mid-teen revenue growth on a year-on-year basis, thereby staying on course to meet the double-digit growth aspiration on a full year basis. InCred Equities said, “On a low base, we expect consolidated sales growth of 14.6 per cent YoY led by pricing growth in Q3FY25F. Volume growth is expected to be 6 per cent (sequentially better than 5 per cent in Q2FY25). Partial absorption of sharp increase in input costs and continued thrust on A&P spending is expected to drive a 198bp YoY contraction in EBITDA margins to 19.2 per cent.”
The FMCG firm said that its domestic business posted a sequential uptick in underlying volume growth with sustained market share gains across key franchises. The International business, it added, delivered broad based mid-teen constant currency growth. Bangladesh continued to demonstrate visible strength and resilience with high double digit constant currency growth. Vietnam had a soft quarter in a sluggish consumption environment. MENA and South Africa maintained their robust double digit growth momentum.
Marico’s Q3 performance across segments
During the quarter, the FMCG sector witnessed steady demand trends on the back of improving rural consumption and stable sentiment in urban vis-à-vis the preceding quarter. Amidst this backdrop, Marico’s Parachute Coconut Oil was resilient amidst the rising input cost and pricing environment, albeit slightly moderating in volume terms on a sequential basis. The brand recorded low teen revenue growth, aided by pricing interventions during the current year.
Saffola Oils, Marico stated in its Q3 business update, held firm in volume terms despite steep pricing interventions in response to the rise in vegetable oil prices. The brand posted high teen revenue growth.
Value Added Hair Oils declined marginally owing to competitive headwinds in the bottom of the pyramid segment, although the healthier trajectory in mid and premium segments is aiding gradual recovery vis-à-vis the preceding quarter.
Foods and Digital-first brands sustained their strong growth momentum and continued to deliver well-ahead of aspirations.