Marico reported a strong set of Q1 numbers with profits growing 18 per cent even though revenues were flat. The company has pro-actively passed on to consumers the benefits of lower input costs by moderating prices, which has helped in driving up volume growth of 8 per cent. Speaking to BTVI , Marico MD and CEO Saugata Gupta says the volume growth may remain below double digits in Q2. But the company is endeavouring to enhance the volume growth to 10 per cent in second half of FY17, he says. Excerpts:
What are been the highlights of the Q1 results? Why was the revenue growth flat?
Since we are operating mostly in emerging markets, our entire focus is to maximise volume growth as well as maintain or gain market share in most of the portfolios. Therefore, we have managed to pro-actively pass on to the consumers the benefits of input cost savings in terms of pricing action — one of the reasons why we have been able to drive 8-per cent volume growth, especially in Indian business where the rural market, especially the consumption situation, was stressed because of two consecutive years of drought. I believe that going forward the situation is likely to improve.
I don’t think so. We are comfortable with the pricing trends. While we won’t see any shrinkage in input cost, we have also not seen any significant inflationary trends. However, the advantages will come into the base.
I don’t see any drastic margin expansion going in the second half. Having said that what is important is that with a good monsoon, lower food inflation and things such as the 7th Pay Commission and OROP (One Rank One Pension), we believe that consumption both in rural and urban India will pick up. Therefore, the second half is likely to see better volume growth for the sector.
Lower sales in Bangladesh, which is your largest market after India, has brought your international business down. What have been the the challenges there? What is the outlook going forward?
In Bangladesh, we have had a situation of a single portfolio dependency, where our dependency on Parachute has been very high. We have started initiating some actions in order to accelerate the non-Parachute portfolio. It is taking a bit of time. Also, last year, we did a structural change so that Bangladesh can leverage a lot from India. All this process will take some time. I am confident that the Bangladesh business will be back on track from the second half of the year.
What is your outlook on volume growth given a good monsoon and expectations of pick up in rural demand? Do you see it touching double digit any time soon?
I don’t see that happening in Q2. But, definitely, our endeavour will be to hit 10 per cent in the second half of the year.