Marico Q2FY24 Update: Low-single digit rise in volumes amid subdued rural demand

Marico's domestic volumes in the September quarter (Q2FY24) grew in low-single digits on a year-on-year (YoY) basis, with low single-digit growth in Parachute Coconut Oil and Saffola Edible Oils, and low single-digit value growth in Value Added Hair Oils, the FMCG major said in an update on Wednesday, October 4. The demand trends largely mirrored those observed in the preceding quarter as instances of rising food prices and below-normal rainfall distribution in some regions seemed to impede the anticipated recovery in rural demand, it added.

In the first quarter, Marico's India business reported low-single-digit volume growth due to significant trade destocking in Saffola edible oils and channel inventory adjustments in core portfolios.

The company expects the consumption trends to improve in the second half, particularly in rural areas. Retail inflation levels staying within RBI’s target range, hike in MSPs, healthy sowing season, easing liquidity pressures and government spending are likely to boost consumption.

Marico's consolidated revenue was marginally lower in the quarter ended September, as compared to the year-ago period, pressured by pricing corrections in key domestic portfolios over the last 12 months. The company said that the pricing correction will progressively come into the base going ahead. Currency depreciation in some of the overseas markets also affected the reported INR growth in the international business.

However, the company observed healthy trends in offtakes, market share and penetration across key franchises. The newer portfolios, Foods and Premium Personal Care (including Digital-First), remained on course to achieve full-year aspirations, the company said.

While the domestic demand remained low, the international business delivered double-digit constant currency growth.

Marico expects a robust gross margin expansion on a year-on-year basis. "While A&P spends were also significantly ramped up towards strategic brand building of its core and new categories, we expect healthy operating profit margin expansion leading to low double-digit operating profit growth," the company said.

Marico maintained its aspiration of delivering sustainable and profitable volume-led growth over the medium term.

Meanwhile, ICICI Securities upgraded Marico to ‘buy’ from ‘add’, while raising the target price on the stock to Rs 670 from Rs 610 earlier.