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Marico Sees Inflation Impact Fading In Second Half Of Fiscal

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Parachute maker Marico Ltd. has weathered the impact of high input costs, but the FMCG company does not expect inflation to be as big a concern in the second half of the current fiscal, said Saugata Gupta, its managing director and chief executive officer.

“I would say largely the inflation is over in majority of the portfolio,” Gupta told BQ Prime in an interview. “Crude is still a joker in the pack, but as far as copra is concerned or vegetable oil, largely directionally it is over. Going forward, we should see sequential improvement in pricing.”

In the second quarter, Marico reported a 3% year-on-year rise in revenue, with volumes having been impacted by sluggish domestic demand. The company’s profit after tax declined 3% year-on-year to Rs 301 crore as operating profit margin shrank 20 basis points to 17.3%.

Volumes, especially of the company’s flagship Parachute brand, are expected to improve in the second half of the fiscal. The company is hoping to achieve mid-single digit volume growth in the domestic market.

In a bid to stay competitive and retain market share, the company has passed on a fall in the price of copra, a key input, to customers. Copra prices fell by 4% sequentially and 20% year-on-year during the second quarter.

“We have been forced to take five price drops during the past seven or eight months, so what happens is that (it) unsettles the market,” Gupta said.

“It takes six to eight weeks from the pricing decision to the last mile, especially in rural markets, for the new price to be discovered by the consumer…”

Gupta is hopeful that by December, they will have the “right pricing” in the market, and therefore, Parachute volumes will recover.

“The good thing is that the rest of the business, whether it is the urban discretionary part, which is the digital, the personal care or food is clocking very well.”

Margins, too, are likely to improve, according to Gupta. For the full year, the company is confident of achieving an Ebitda margin of 18-19%.



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