Patanjali Ayurved Q3 Results: Profit Declines On Raw Material Inflation, Fall In Demand

Patanjali Ayurved Ltd.'s third-quarter profit fell due to rising costs of raw materials and lacklustre demand.

The consumer goods maker net profit declined 17% sequentially to Rs 116.5 crore in the three months ended December, according to its exchange filing.

Key Highlights (QoQ)

• Revenues rose 10% to Rs 2,735.4 crore.

• Operating profit dropped 11% to Rs 249.5 crore.

• Margins narrowed to 9.1% as against 11.3%.

“The overall operating environment remained challenging throughout the quarter, with unprecedented inflation across key raw material prices, fuel and transportation costs along with subdued consumer sentiments,” Ram Bharat, director at Patanjali Ayurved, told BloombergQuint.

He cited prices of palm oil that have shot up from Rs 65 a litre to Rs 115 a litre.

The company, which saw rising demand for its ayurvedic products such as chyawanprash and juices during the Covid-19 pandemic, has been impacted by a slack in discretionary spends, he said.

While sales of ayurvedic products jumped 19.9% to Rs 286.4 crore, sales of home care and personal care products fell 2.4% to Rs 597.5 crore during the October-December period. Food and dairy product sales rose 14.7% to Rs 1,809.6 crore.

Other consumer goods peers such as Hindustan Unilever Ltd. and Dabur Ltd. have also cited “exceptional price instability” in most of their raw materials, packaging and transportation costs, with some hitting 20 to 40-year highs between October and December last year.

While volume growth slowed with inflation hurting consumers' purchasing power, the makers of most consumer goods expanded margins through hard savings and calibrated price hikes.

Bharat expects the operating environment to remain volatile. Prices of edible oil, especially sunflower oil, is likely to escalate amid the ongoing conflict in Ukraine, as the country is a large producer of sunflower oil.

Both the Baba Ramdev-backed firms—Patanjali and Ruchi Soya Industries Ltd.—are already facing supply-side constraints of sunflower oil. “There is no clarity on the shipment time of sunflower oil and we are unable to contact the supplier… it is a hotchpotch situation,” Bharat said.

Patanjali requires about 300-400 tonnes of sunflower oil in a month, while Ruchi Soya requires about 5,000-10,000 tonnes, he said. The ayurvedic products maker may now look to other nations to plug the shortfall.