Marico Ltd on Monday posted a consolidated net profit of ₹199 crore for the fourth quarter ended March 31, 2020, down by 50.6 per cent from the corresponding quarter last year

The FMCG company had posted a net profit of ₹403 crore in the March quarter of FY19.

The India business recorded a volume decline of three per cent, vastly affected by disruptions in the last fortnight of March, due to lockdown initially enforced in some States and eventually all over the country, to contain the outbreak of Covid-19 in India, the company said in a regulatory filing. “But for this disruption, the business would have delivered low to mid -single digit volume growth during the quarter,” it added.

“The unfortunate outbreak of Covid-19 and consequent lockdown has brought about severe hardships to various sections of our society. At this time, we are focusing on the movement of food and grocery items of daily use to our consumers, subject to all safety norms. We will continue to invest behind our core portfolios, while also adapting to shifts in consumer behaviour that may be brought about by this unprecedented human crisis,” said Saugata Gupta, MD & CEO, Marico Ltd.

Disruption in supply chain

The domestic business was impacted by the disruption in supply chain operations caused by the lockdown enforced in March due to Covid-19, said Marico. The business would have delivered flattish revenue growth in the quarter, had these disruptions not occurred, the company noted.

The revenue from operations during the quarter under review stood at ₹1,496 crore, down by 7.022 per cent from the year-ago quarter’s ₹1,609 crore.

The net profit for FY20 was ₹1,043 crore, down by 7.78 per cent from the previous year’s ₹1,131 crore.

Marico witnessed some encouraging signs in demand in its core portfolios until early March, which sharply diminished as economic activity progressively slowed and adherence to social distancing norms became an imperative, it said.

In the last week of March, the company was able to record sales largely in the Saffola Oils and Foods portfolio. The India business managed to post low single digit volume growth in secondary sales in the quarter, it said.

The stress in personal care categories heightened during this period, while the foods and allied categories, which were growing healthily earlier as well, gained disproportionately with households stocking up these items in the days leading to the lockdown, the company noted.

Challenges for the traditional channel in the rural and urban markets mounted during the quarter, while modern trade and e-commerce grew healthily and gained higher salience in the India business, it said.

With Covid-19 turning into a pandemic, the overseas geographies were also impacted in varying degrees, it said. Its international business declined by six per cent in constant currency terms with MENA and South Africa businesses posting sharp drops, while Bangladesh and Vietnam still ended in the green, given relatively limited restrictions imposed in these regions in March.

While EBITDA was down four per cent YoY, gross margins improved marginally by 22 bps, due to the unfavourable portfolio mix in the India business, it said.

While the company holds its medium term aspiration of delivering 8-10 per cent volume growth and 13-15 per cent revenue growth, the near term is currently unpredictable, it said.

Focus areas

It will focus on right pricing and availability of goods to the consumer to manoeuvre through the current crisis, it said. “We will continue to invest behind brand building to support market growth initiatives in core categories and expansion into adjacent categories,” it added. In the near term, the company will also reallocate spends from non-media to media channels. Spends on the digital platforms will continue to rise, it said.

In FY21, the company will strive to maintain the operating margin at FY20 levels, it said. However, the company would be comfortable maintaining operating margin at 19 per cent plus over the medium term.

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