FMCG major Marico Limited on Monday recorded Q3FY24 profit at Rs 386 crore, up 15.9 per cent in comparison to Rs 333 crore during the third quarter of FY23, surpassing estimates. It posted revenue from operations at Rs 2,422 crore, down 1.9 per cent with underlying volume growth of 2 per cent in the domestic business and constant currency growth of 6 per cent in the international business. Revenue for the corresponding quarter of previous year was at Rs 2,470 crore.
According to a CNBC TV18 poll, Marico was expected to record Q3 profit at Rs 366 crore and revenue was estimated at Rs 2,420 crore. The company EBITDA stood at Rs 513 crore, up 12.5 per cent on-year.
“Gross margin expanded by 634 bps YoY, ahead of expectations, owing to softer input costs and favourable portfolio mix,” the company said. A&P spends, meanwhile, was up 12 per cent YoY, up 125 bps as a percentage of sales, as the company stayed focused on strategic brand building of core and new businesses.
During the quarter, Marico said, demand trends were stable with no visible improvement from the preceding quarter. Rural demand remained soft, while urban demand steadied its moderate growth trajectory. Within the FMCG sector, mass home and personal care categories aligned closely with the trajectory of rural demand, while packaged foods led the sector owing to higher urban salience and penetration-led growth.
Among channels, General Trade continued to drag as it grappled with liquidity and profitability constraints, while alternate channels grew healthily. In response to the extended slowdown witnessed in the GT channel, the Company took some measures during the end of the Q3 to alleviate ROI challenges faced by channel partners, which could potentially pave the way for a structural recovery in the growth prospects of the channel.
“Amidst the given operating environment, the India business posted volume growth of 2 per cent, which dipped sequentially primarily due to a stock reduction undertaken across key portfolios as a part of the aforesaid initiatives to support our GT channel partners,” Marico said in a statement. Domestic revenue was at Rs 1,793 crore, down 3 per cent on a year-on-year basis, lagging volume growth as some pricing corrections in key portfolios were yet to anniversarise. Offtakes remained healthier across key portfolios with +75 per cent of the business either gaining or sustaining market share and penetration levels. The International business, meanwhile, delivered mid-single digit constant currency growth dragged by transient macroeconomic headwinds in Bangladesh while other regions delivered a resilient performance.
Within the International business, Marico said, Bangladesh registered a 6 per cent decline in CCG (constant currency growth) terms as the region experienced transient macroeconomic headwinds. Newer portfolios of shampoo and baby care witnessed healthy growth. “We expect business performance in Bangladesh to revert to a healthy trajectory from the coming quarter. South-East Asia grew 4 per cent in CCG terms, amidst slower HPC demand in Vietnam. MENA continued its strong growth momentum and delivered a 26 per cent CCG with both the Gulf region and Egypt growing in double-digits. South Africa registered 33 per cent CCG driven by the ethnic hair care segment. NCD and Exports posted 16 per cent growth,” the FMCG major said in a regulatory filing.
Q3 performance across product portfolio
Parachute Rigids registered 3 per cent volume growth with loose to branded conversions picking up some pace. Volume growth on a 4-year CAGR basis was at 3 per cent. During the quarter, the franchise gained ~40 bps in market share on MAT basis. “We expect volume growth to continue its gradually improving trajectory as input costs exhibit an upward bias amid stable consumer pricing,” the FMCG firm said.
Value-Added Hair Oils grew by 3 per cent in value terms amid slower rural demand. Value growth on a 4-year CAGR basis was at 6 per cent. The VAHO portfolio continued to exhibit divergent trends with bottom-of-the-pyramid segments remaining subdued, while mid and premium segments grew in mid to high single digits.
Saffola Edible Oils registered a mid-single digit volume decline, which was attributable to a high base and extended sluggishness in trade sentiment resulting in lower inventory levels on a year-on-year basis, despite healthy offtakes. Revenue decline was in the mid-twenties on a year-on-year basis due to pricing corrections over the last 12 months that were yet to come into the base.
Foods category continued its steady growth trajectory with 18 per cent value growth YoY. Saffola Oats maintained its category leadership while Honey and Soya Chunks have been scaling up on expected lines. Newer categories of Peanut Butter, Mayonnaise and Munchiez are witnessing healthy traction, Marico said. True Elements and Plix have been scaling up well in their respective categories.
Premium Personal Care sustained its strong double digit growth trajectory during the quarter. The digital-first portfolio clocked an exit ARR of Rs 400 crore+ in Q3.
Going forward
With macro indicators signaling positivity, continued government spending and more favorable consumer pricing across FMCG categories, the company remains optimistic of a gradual uptick in consumption trends over the course of the next 4-5 quarters. “We continue to draw confidence from healthy offtakes and market share gains in our key portfolios, while we have also initiated corrective measures to re-ignite growth in the traditional channel and sustained investment towards driving differential growth in new businesses in line with our strategic priorities,” it said.
Owing to the broad-based construct, the International business remained rather steady despite transient macroeconomic and currency devaluation headwinds in select regions. “We expect improving trends ahead and aim to maintain the double-digit constant currency growth momentum on a full year basis. While erstwhile pricing interventions in the domestic portfolio and currency devaluation headwinds in certain international markets have visibly dented realizations so far, consolidated revenue growth is expected to move into positive territory in the last quarter of the current fiscal as the base catches up,” it added.
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 further added that the company expects operating margin to expand by ~250 bps in FY24.
“We are also on course to deliver our highest ever operating margin in FY24 led by robust gross margin expansion. As we head into the last quarter of FY24, we will continue to drive improvement across key performance parameters in the domestic as well as the International businesses,” Marico concluded.
