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Marico remains cautiously optimistic amid volatile biz environment
04-Jul-20   10:41 Hrs IST

FMCG major Marico on Friday issued an overall summary of the operating performance and demand trends witnessed in Q1 June 2020.

The company said it remains cautiously optimistic about the future as it unfolds, however much will depend on the extent of the spread of COVID-19 in India and overseas and how the on-ground environment evolves in conjunction with the response of respective governments. While the business environment and consumer sentiment remain volatile, the company said it is well positioned to withstand these challenging times through innovation, agile execution, aggressive cost management and its portfolio of trusted brands.

Despite significant disruptions during the first fortnight of April, the FMCG major was able to steadily scale up operations to near-normal levels in June. The edible oils and foods businesses resumed operations in early april, however the hair oils & personal care businesses commenced in late April/early May. The distribution network also improved progressively during the quarter, with general trade and e-commerce channels gaining over modern trade due to heightened social distancing concerns.

Marico said that while the India business clocked sales above the annual average monthly run rate of FY20 during the quarter, the reported volume decline on a year-on-year basis will be in low teens, given the very significant skew of revenues (c.31% of annual sales) and high base in the first quarter of the last year. With the Q1 top line translating into a single digit growth over the annual run rate of FY20, the company expects to bounce back to posting volume and value growth during the rest of the year.

International markets have also been disrupted either due to total or partial lockdowns. The international business witnessed a mid-single digit decline in constant currency terms in Q1, but should recover in the course of the year, as it is now clocking more than 100% of the FY20 monthly average top line, led by the Bangladesh business, the firm said.

While overall revenues have declined in double digits, a combination of benign input costs, aggressive cost control and rationalisation of A&P spends in few discretionary portfolios on a lower topline, will lead to expansion of operating margins compared to the corresponding quarter last year. However, for the balance of FY21, Marico expects operating margins to hold to a minimum of the previous year levels.

The company concluded that it will continue to drive sustained profitable volume-led growth over the medium term, through its focus on strengthening the franchise in the core categories and driving the new engines of growth towards gaining critical mass.

Shares of Marico rose 0.29% to Rs 358.60 on Friday.

On a consolidated basis, Marico's net profit fell 50.62% to Rs 199 crore on 7.02% decline in net sales to Rs 1,496 crore in Q4 March 2020 (Q4 FY20) over Q4 March 2019 (Q4 FY19).

Marico manufactures consumer products and services in the beauty and wellness space.

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