Companies

FMCG company Jyothy Labs eyes double digit growth

Abhishek Law Kolkata | Updated on January 30, 2021

Ullas Kamath, Joint Managing Director, Jyothy Labs

As consumer sentiments improve and growth comes back to urban markets, home growth FMCG company Jyothy Labs – makers of Margo soaps, Henko detergents, Ujjala fabric whitener and Exo & Pril dishwashing soaps and liquids - is looking at double digit growth; while maintaining margins at over 16 per cent levels.

For Jyothy Labs, nearly 60 per cent of its turnover comes from urban areas while the remaining from rural areas.

Premium offerings and large packs are driving volumes in modern trade and CSD stores – which together account for 15 per cent of its turnover now (as against the 25 per cent pre-Covid times); small packs introduced over the last few quarters have started gaining traction in rural areas, Tier-III, Tier- IV and Tier –V towns. Small packs now account 25 per cent of the company’s turnover.

Rural to urban growth (volume) has been pegged at 1.3: 1 (i.e. rural is growing at 1.3 times as that of urban growth).

With renewed focus on rural distribution, the turnover mix may change to 58-42 per cent by the end of this fiscal; while over the next few quarters a 55-45 turnover mix (urban to rural) is more likely.

Improving volumes

According to Ullas Kamath, Joint Managing Director, Jyothy Labs, apart from categories like personal care and dishwashing as a segment has done well. The latter’s growth has been fuelled by increased washing in homes (due to lockdown, increased stay at home) and because of greater adoption of dishwashing products across rural India through smaller packs.

This apart household insecticides (under Maxo brand) saw a 10 per cent growth.

Kamath said: “Fabric care sales are improving (2.3 per cent jump); and personal care has seen an over 48 per cent growth in Q3FY21 (Oct – Dec). Overall volume growth has been 15 per cent during this period and nearly 8 per cent for the first nine months. Consumer sentiments have turned positive again. It looks like we will maintain this momentum.”

“A double digit growth is possible in the coming quarters if there isn’t a second wave of the virus or other stringent containment measures,” he told BusinessLine.

Kamath added: “Modern trade and CSD sales have recovered substantially; but are still lower than pre-Covid levels when compared to last nine months.” However, e-commerce is making up for some of the losses in modern trade and is now contributing to 4 per cent of our turnover, up from the 1.5 per cent that we witnessed in pre-Covid times.

Margins

The EBITDA (earnings before interest, tax, depreciation and amortization) margin between April to December 2020 improved to 17.2 per cent (up from 16 per cent). It stood at 16.7 per cent in Q3FY21 (up from 15.8 per cent).

Advertisement expenses saw a 40 per cent quarter-on-quarter jump while there was some pressure on raw materials – a palm oil derivative that saw a 60 per cent price rise in the last six months, but is softening now. This led to Jyothy Labs increasing soap prices by 4 per cent to maintain margins.

“Consumer sentiments have improved, and raw material price hikes have been factored in. Ad spends are up. Cost control measures are in place. We hope to retain margins,” he said hoping that no major tax rate change is initiated in the Budget thereby slowing down the consumer sentiments again.

Published on January 30, 2021

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