Marico’s Q4FY13 Numbers Disappoint

FMCG major Marico reported muted numbers for Q4FY13. Its sales as well as net profits (excluding exceptional items) for the quarter have come in lower than the street’s expectations. The consolidated net profit grew by 20.3% over the previous year to Rs 84 crore. However, if we exclude the exceptional income of Rs 11.6 crore, the net profit was up by just 1% on a YoY basis at Rs 72 crore for Q4FY13. As regards the topline, the total operating income stood at Rs 999 crore for Q4FY13. Though this was up by 9% on a YoY basis, it came in lower than the expected Rs 1,060 crore.

The international business dipped by 1% for Q4FY13. This business segment constitutes 22% of the company’s overall FY13 revenues and a 74% fall in the profits from this segment to Rs 3.4 crore impacted Marico’s consolidated numbers as a whole.

Volumes growth has been better at 8%, driven by the spurt in the FMCG business in India. However, the company did see a slowing in both value and volumes growth when compared to the first nine months of FY13. It is said to be focusing on volumes now, and has cut product prices for key brands like Parachute and Saffola in the range of 3%-8% in March 2013 to spur demand.

The EBITDA margins remained flat despite a decline in raw material prices on a YoY basis, as ad spends and employee costs rose. The average price of copra and coconut oil, key inputs for its products, were marginally down and helped offset the rise in prices of sunflower and safflower oil, which were up 10% YoY.

The coconut oils segment (Parachute and Nihar) saw its market share improve by 240 bps to 57.6%, enabling the company to retain its leadership position. It is garnering market share from loose oils sold in the unorganised segment and expects the trend to continue. The value-added hair oils (Parachute Advanced, Nihar and Hair & Care, which posted strong volume growth of 24%) are also expected to witness better growth going forward.

Saffola refined edible oils, though, saw slower growth of 7% due to softer discretionary demand and higher input cost inflation. The smaller contributor, the breakfast category (Saffola oats and muesli) is expected to continue growing fast and well.

Though the domestic business outlook appears to be on the better side, the company’s international business remains a concern and will take a few quarters to gain pace. At this juncture, the stock is trading at a PE of 32.74x to its FY13 EPS.