Marico
The ‘Parachute’ company, Marico, our desi FMCG company posted a good set of numbers the company posted for Q1Fy15. Consolidated revenue at Rs.1623 crore, was up 25% (YoY), on the back of an overall 5% growth in volume and 6.5% growth in India. Domestic business grew 28% while international business grew 16%. EBITDA showed a 20% growth at Rs.267 crore and net profit for the quarter was up 19% at Rs.185 crore.
Looking ahead, rising price of input costs, especially copra remains a worry. Market prices of Copra have rallied further post Q4FY14. The average market prices of copra during Q1FY15 were up by 131% compared to Q1FY14 and 22% compared to Q4FY14. The crop is estimated to be lower by 8% as compared to the previous year due to weak rainfall in Tamil Nadu last year. Copra being in off season from now onwards, prices are likely to be range bound for next quarter. The Company had initiated further price increases in April’14 and June’14 to protect its absolute margins. The company hopes to maintain the prices at current levels and this means in the immediate medium term, it could face some margin compression. Yet, it is estimated to maintain margins at 17-18%. It expects volume growth of 7-8% in the immediate future and it expects major support from its Youth Brands portfolio (Set Wet, Zatak, Livon) to show a 15 to 20% growth.
Also on the tax front, Effective Tax Rate (ETR) for the FMCG business during Q1FY15 is 26.3% as compared to 23.8% during Q1FY14. The increase in the ETR is primarily due to one of the factories in India going out of tax exemption and another is moving into 30% exemption bracket from 100% exemption. Also, from this year, there has been an increase in tax rate in Vietnam. The expected ETR during FY15 and FY16 could be around 28-29%. It should be noted that this tax rate is basis the accounting charge in the P&L account. Thus the company will be able to do well only if it manages to continue with its volume growth as without price rises, it is volumes alone which will help sustain margins.