Marico Q4 Update: Weak Rural Sentiment, Inflation Hurt Consumption

Marico Ltd. expects “marginal growth” in profit in the quarter ended March as consumption trends remained subdued amid weak rural sentiment, and aggravating inflation in global commodities due to geopolitical tensions.

While companies hiked prices across FMCG categories to cope with the cost-push, “persistent inflation continued to hurt consumer wallets across rural and urban”, the maker of Parachute coconut hair oil said in its fourth-quarter business update released on the bourses.

The India business, however, stayed “relatively firm, riding on focused execution and market share gain”.

• Revenue growth in the quarter was in “low single digits”.

• Volumes were marginally positive, partly because of an exceptionally high base of 25%.

• Parachute coconut oil volumes were “marginally lower” year-on-year.

• Value-added hair oil category grew in “low single digits” in value terms.

• The Saffola franchise grew in “high teens” by value in Q4.

• Premium personal care posted broad-based double-digit growth.

• Digital-first brands, Beardo and Just Herbs, “performed in line with expectations”.

• The international business delivered a mid-teen constant currency growth in FY22 on a strong base, with all markets faring well”.

• During the quarter, Marico expanded the total addressable market of the brand ‘Saffola', through the launch of peanut butter and mayonnaise.

During the quarter, Marico took calibrated price hikes in hair oils and edible oils portfolios to combat the spike in commodities, mainly crude. Copra price deflation, however, helped with gross margin remaining unchanged over the year earlier.

Peers Hindustan Unilever Ltd. and Godrej Consumer Products Ltd., with relatively greater exposure to raw materials such as palm oil, and crude and its derivatives, are more vulnerable, given the surge in prices amid the Russia-Ukraine conflict.

Advertising and promotion spends for Marico were higher year-on-year, as the company said it maintained investments toward strategic brand building of core and new franchises. Marico, however, expects media spending to reduce.

“There are possibilities of temporary pushback on strategic funding for new initiatives,” ICICI Securities said citing Saugata Gupta, managing director and chief executive officer at Marico. He expects the current inflationary situation to start becoming better only in the second half of FY23.

Shares of Marico closed 2.09% higher against a 2.15% rise in Nifty50 on Tuesday.