Marico Posts Robust Q3FY12 Numbers

Marico, on February 2nd, reported robust Q3FY12 numbers. The result was posted during the closing of the market hours when the scrip was down by 2.47 per cent. However, the scrip today has closed with a high of 6 per cent at Rs 162.30. In Q3FY12, on a consolidated basis, the net sales of the company increased by 29.36 per cent to Rs 1,058 crore (volume growth of 20 per cent) while the net profit of the company increased by 21 per cent to Rs 84 crore on a YoY basis. 

The nine-month performance of the company has also been very good wherein the topline of the company increased by 29 per cent at Rs 3,080 crore while the bottomline of the company grew by 15 per cent to Rs 247 crore. Higher raw material prices, which increased by 40 per cent to Rs 1,381 crore on a YoY basis, have had some impact on its bottomline. Overall, Marico experienced good growth across its businesses in the third quarter, as highlighted below.

• In Q3FY12, the consumer products business of the company grew by 27 per cent (excluding sales of Sweekar which was divested in March 2011) to Rs 716 crore. 
• The growth was on the back of a healthy volume spiral of 16 per cent in the domestic business. 
• Coconut oil registered volume growth of 13 per cent while that of Saffola and hair oil was 15 per cent and about 20 per cent respectively. 
• The company’s International FMCG Business Group (IBG) registered a growth of 39 per cent to Rs 267 crore on a YoY basis, which was on the back of 85 per cent equity acquisition in Vietnam in February 2011.
• Kaya Skin Care, during the quarter, posted a revenue growth of 21 per cent to Rs 75 crore while it reported a loss of Rs 14 crore versus the profit of Rs 5 crore in the similar quarter last year.
• In Q3FY12, the EBIDTA margin of the company decreased by 70 basis points to 12.7 per cent on a YoY basis. This was primarily due to higher advertising costs (ASP). The ASP increased by 48 per cent to Rs 133 crore. This is basically an investment by the company for its existing as well as new initiatives.

The input prices for the company have shown signs of cooling but are still higher. Copra prices (accounts for 40 per cent of the company’s raw material) are still higher by 4 per cent when compared to Q3FY11, but have declined by 9 per cent when we compare on a sequential basis. The prices of the other key inputs like safflower oil and rice brain oil have been up by 28 and 33 per cent respectively during Q3FY12 on a YoY basis.
  
On the notification of non-standard pack size, the company believes that the impact may not be significant for them. However, the consumers may not have a wide choice of price points. The notification will be effective from July 1, 2012 but the industry players have taken the matter to the concerned authorities for further review.

Marico has a strong market share in most of the products (coconut oil-54 per cent, Saffola oil-57 per cent and hair oil-24 per cent) which is very good for the company. With the cooling of raw material prices and a strong consumption demand, the company’s growth will be fuelled further. We at DSIJ had recommended Marico in our issue of Volume No 1 of 2012 (‘Where To Invest In 2012) and we still stick to it as we expect the company to perform well on the bourses.

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