Marico Q2 net profit surges 17% to Rs 253 crore, but slowdown affects domestic business

Homegrown FMCG major Marico on Friday reported 17 per cent year-on-year (Y-o-Y) growth in its consolidated net profit at Rs 253 crore for the second quarter ended September 30, 2019, aided by improvement in operating margin and growth in international business.

"The company had reported consolidated net profit of Rs 216 crore in the corresponding period of fiscal 2018-19," Marico said in a filing to the Bombay Stock Exchange.

Consolidated revenue from operations fell marginally to Rs 1,829 crore in Q2FY20 as against Rs 1,837 crore in Q2FY19, with an underlying domestic volume growth of 1 per cent and constant currency growth of 9 per cent in the international business.

"The company had a soft second quarter in the face of a challenging liquidity and consumption environment in the domestic market, especially in rural, while the international business provided some respite on the back of a robust performance in Bangladesh," it said.

The company, which sells brands like Parachute Coconut Oil and Saffola, reported 16 per cent Y-o-Y growth in earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs 353 crore. EBITDA margin expanded by 270 basis points to 19.3 per cent during Q2FY20, "as the company actively invested behind capability and brand building during the quarter".

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Advertising and sales promotion expenses stood at 10.8 per cent of sales, up 12 per cent on a year-on-year basis, Marico said in the exchange filing.

The domestic business clocked a turnover of Rs 1,398 crore, down 3 per cent on a Y-o-Y basis in the backdrop of an accelerated slowdown in consumption during the quarter. The operating margin (before corporate allocations) improved to 20.9 per cent in Q2FY20 as against 18.5 per cent in Q2FY19. This was mainly attributable to a benign input cost environment, though the company continued to up the investment in brand building to strengthen the core portfolio and support the multitude of new products launched over the last 18 months, it said.

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Depreciation increased to Rs 35 crore compared to Rs 31 crore in same quarter last year, due to capitalisation of capacity additions in some of the domestic manufacturing facilities during the year.

On outlook, the FMCG firm said, "The company will continue to focus on a balanced approach towards volume growth and healthy profitability. The company would aim to maintain EBITDA margins at 20 per cent plus in the India business over the medium term."

The estimated capital expenditure in FY20 is likely to be around Rs 125-150 crore, it added.

The company has also declared interim equity dividend of Rs 2.75 per equity share of Rs 1 each, being 275 per cent on the paid up equity share capital of Rs 129.09 crore, for FY 2019-20. The record date for the said interim dividend is November 5, 2019 and dividend will be paid to the shareholders on or November 22, 2019.

Marico shares closed 0.32 per cent lower at Rs 393.40 apiece on the Bombay Stock Exchange on Friday.

Edited by Chitranjan Kumar