Marico Ltd. expects demand and margin trends to improve in the second half of fiscal ending March 2023 on easing commodity prices, according to its annual report for 2021-22.
The maker of Parachute hair oil is closely watching rural growth and is hopeful of a recovery in demand in light of the good harvest season, normal monsoon forecast and government spending.
There is "some degree of comfort" on the margin front, Marico stated, as prices of copra -- which constitutes about half of its raw material basket -- is likely to remain benign.
"Therefore, we expect demand and margin trends to improve towards the second half of next year. In view of these factors, consolidated operating margin should be in the range of 18-19% in FY23," the report stated. And though near-term demand outlook is "uncertain", the company is confident of staying well ahead of industry growth.
Addressing shareholders, Marico's MD & CEO Saugata Gupta said the company is strengthening the faster-growing new channels, such as e-commerce, but believes traditional trade will continue to be the largest ecosystem for the consumer.
"In rural, while we extend our footprint, we are also expanding our stockist network to expand our direct reach. In urban, we will maintain focus on augmenting our reach in chemist and cosmetic outlets," he said.
Marico is also "confident of maintaining the double-digit constant currency growth in the coming quarters".
"As the pandemic has subsided across regions, we expect the business environment in the markets we operate in to remain stable, unless any major geopolitical concerns flare up. However, if inflation persists, there is a possibility of some currency depreciation in some markets."
In FY22, Marico's revenue from operations was at Rs 9,512 crore.
"We hold our medium-term aspiration to deliver 13-15% revenue growth on the back of 8-10% domestic volume growth and double-digit constant currency growth in the international business," Marico stated in the annual report. "We will aim to maintain consolidated operating margin above the threshold of 19%."
Marico is also working on diversification to expand into foods, premium personal care including digital-first brands, and accelerated growth in the international business, Harsh Mariwala said.
Saugata Gupta said to unlock the next phase of growth, the company is working on ‘4 Ds': Diversification, Distribution, Digital and Diversity.
The first dimension is diversification of business in both domestic and international markets, led by innovation.
In international markets, the focus will be to scale up newer portfolios in Bangladesh and similarly expand the addressable market in Southeast Asia and Middle East and North Africa by replicating the company's successful operating model in Bangladesh.
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