Marico Q1 Results: Profit Up 15.6%, Revenue Dips On Sluggish Rural Demand

Marico Ltd.'s first quarter profit rose beating estimates, but revenue fell on account of sluggish sales in rural markets and a move to cut prices on Saffola edible oil. Its quarterly drop in revenue is the first in three years.The net profit of the maker of Parachute hair oil rose 15.6% over the previous year to Rs 436 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 413.22-crore consensus estimate of analysts tracked by Bloomberg.Marico Q1 FY24 Results (Consolidated, YoY)Revenue fell 3.2% to Rs 2,477 crore, against the Rs 2,510.43 crore forecast.Operating profit rose 8.7% to Rs 574 crore, as compared with the estimate of Rs 579.8 crore.Margin stood at 23.2% versus 20.6%. Analysts had estimated it at 23.1%.Gross margin expanded by 494 basis points year-on-year and 257 basis points sequentially, owing to incrementally softer input costs.Advertising and promotion spend at 8.6% of sales, was up 6.5% to Rs 212 crore.India business revenue fell 5% to Rs 1,827 crore owing to price drops.International business posted 9% constant currency growth, driven by South Africa (37%), MENA (15%), Bangladesh (9%) and Vietnam (5%).For Marico, the underlying domestic volume growth in the June quarter was 3%, as compared with 5% in the previous quarter. Volume remained subdued on account of one-off channel inventory adjustments, according to the company. Factors such as destocking by trade in Saffola oils owing to a sharp fall in vegetable oil prices and trade scheme rationalisation in core categories implemented by the company to correct the historical Q1 revenue skew led to the inventory adjustments.During the quarter, the volume growth for the consumer goods sector stayed in the positive territory, although green shoots in rural market on a sequential basis as anticipated were not visible, the company said. 'Growth remained urban-led, while rural consolidated on a lower base.' From a category standpoint, packaged foods saw growth, while beauty and personal care largely mirrored the trajectory of the rural segment.Parachute coconut oil comprising 34% of sales, saw a 5% dip in value growth while volume fell 2%.Saffola franchise, accounting for 24% of sales, saw 13% decline in value growth as it fell in low double-digits.Value-added hair oils had a flat quarter amid slower recovery in mass personal care categories. It gained 20 basis points in market share. The foods category saw value growth of 24%, aided by steady rise in core and newer segments. Among the sales channels, modern trade and e-commerce grew in double digits, while general trade declined in mid-single digits, the company said.Marico continues to see a downward trend in retail inflation. Copra prices declined by 8% sequentially and 7% YoY, aided by flush season supplies. The company expects prices to remain rangebound with a slight upward bias in the near-term as the seasonal supplies slow down and festive demand picks up. Rice Bran oil prices declined 16% QoQ and 38% YoY, in line with the sharp correction in the international vegetable oil complex. Similarly, prices of liquid paraffin was flat and HDPE was down 15% YoY. Overall, retail inflation is now at sub-5% levels from as high as 7.4% last year and 5.7% in the quarter ended March, according to Marico.Rural recovery has been slower than expected, the company said. 'The progressive moderation in commodity and retail inflation continue to infuse optimism for a gradual recovery in volume growth, led by the rural sector,' according to the company. However, it will be critical to monitor the spatial distribution of rainfall and impact of recent erratic weather patterns on the agricultural cycle, and consequently, rural incomes, it said.The healthy offtakes along with market share and penetration gains across key categories also indicate the likelihood of uptick in volume growth in the coming quarters, the company said in its investor's presentation.Marico expects revenue growth to move into positive territory in the second half of FY24, as pricing deflation in the domestic portfolio has bottomed out and will now taper off through the rest of the year.With incremental gross margin tailwinds in the first quarter, Marico expects highest-ever operating margin of over 20%+ in fiscal 2024.'Over the medium-term, we hold our aspiration to deliver 13-15% revenue growth on the back of 8-10% domestic volume growth in the domestic business and double-digit constant currency growth in the international business,' the company said. It will also aim to maintain consolidated operating margin above the threshold of 19% in the medium-term.Shares of Marico rose 3.41%, as compared with a flat benchmark Nifty 50.

Marico Q1 Results: Profit Up 15.6%, Revenue Dips On Sluggish Rural Demand

Marico's quarterly revenue dropped for the first time in three years.

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Marico Q1 Results: Profit Up 15.6%, Revenue Dips On Sluggish Rural Demand

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