Q3 Update: High Inflation Slowed Consumption In India, Says Marico

Marico Ltd. reported double-digit revenue growth in the quarter ended December even as volumes remained largely unchanged amid weak consumption.

“The quarter was characterised by slowing consumption patterns which affected the whole sector,” the company said in its quarterly update filed with the exchanges. “This [slowdown] was due to continuing inflation impacting disposable incomes and rising mobility unleashing some degree of pent-up demand for discretionary goods, services and out-of home consumption.”

High inflation was especially hurting rural households. "Rural demand was sluggish albeit optical to an extent, given the high base," the company said.

How Its Segments Fared

• Parachute coconut oil had a “muted quarter” on a high base.

• Value added hair oils posted “softer growth” in value terms in the quarter, but delivered double-digit value growth on a two-year annualised basis.

• The Saffola franchise grew in high teens in value terms, led by 20% growth in foods.

• Saffola edible oils' volumes dropped, owing to higher in-home consumption in the base and weak trade sentiment due to fluctuating input prices.

• Premium personal care posted double-digit growth.

• Digital-first brands, Beardo and Just Herbs, tracked in line with expectations

International business delivered high teen constant currency growth on a "decent base".

“All markets fared positively, led by Bangladesh and a smart recovery in Vietnam,” the company said.

Overall, its consolidated revenue growth in the quarter was in low teens.

Among key inputs, copra prices were mostly range bound before witnessing correction towards the end of the quarter. Edible oil prices have also started softening, while crude oil prices remained firm, Marico said.

The company expects gross margin to improve sequentially, but remain lower on a year-on-year basis. "Operating margin is expected to be near the levels of the preceding quarter," it said.

Analysts expects volume growth to be tepid for Marico's peers, too. "We expect Q3 FY22 volume growth on YoY basis for entire consumer staples to be muted due to rural slowdown, grammage cuts and impact of inflation," Abneesh Roy, executive director, institutional equities at Edelweiss Securities, told BloombergQuint.

Shares of Marico ended 0.26% higher on Monday.