Financial Daily from THE HINDU group of publications
Thursday, Apr 22, 2004
Financial Daily from THE HINDU group of publications Thursday, Apr 22, 2004 |
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Corporate
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Performance Columns - Microscope Marico industries: Holding up, against odds Aarati Krishnan
MARICO Industries has delivered reasonable sales and profit growth in a challenging year for FMCG companies, thanks to good showing from new product launches and a conscious strategy of passing on input cost spikes to consumers through higher prices. Net sales for 2003-04 increased by 14.8 per cent, driven by hefty volume growth in the hair oils business and increases in selling prices on Marico's entrenched brands. Operating and net profits have grown by 10 per cent and nine per cent respectively, after excluding one-time items that impact the comparability of the 2003-04 numbers with those of the previous year. On the sales front, Marico's traditional cash cows have delivered sedate performance, but an expanding pipeline of new products has helped salvage growth rates. Marico's flagship, Parachute coconut oil, registered just three per cent volume increase during the year, while Sweekar and Saffola cooking oils delivered six per cent volume growth. But overall hair oil volumes grew by 21 per cent, as new products such as Parachute Jasmine and Mediker Anti-Lice significantly scaled up their volumes. In recent years, Marico has invested heavily in a growing pipeline of new products and product extensions; and this appears to be paying dividends. But Marico has had reasonable, but not complete, success, with shielding its profit margins from rising costs. Though it has managed to shield its profit margins from the 20-30 per cent spike in the prices of key inputs such as copra, safflower and crude sunflower oil; staff costs and "other expenses" have crept up. The growth in Marico's net sales has, therefore, not been matched by the increase in its operating and net profits. The outlook for Marico for the current fiscal appears bright on two counts. First, after a sharp spike last year, prices of commodity inputs such as copra and edible oils have flattened out in the recent months, thanks to a good monsoon. Second, with Marico's new hair oil unit at Uttaranchal set to contribute from this fiscal, a lower tax incidence may help bolster the company's net profit performance. The recently declared bonus offer also sends out the signal that the management expects profit growth to be maintained, if not improved upon, in the current year.
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