Mumbai headquartered Marico‘s Q1FY21, revenue from operations was at Rs 1,925 crore (US$ 257 million), down 11% YoY. According to the company, the domestic business was severely impacted in April due to supply-chain disruptions following the national lockdown extension. Still, it was able to scale up sequentially in May and June as restrictions were relatively eased. The domestic business clocked sales at 104% of the annual average monthly run rate of FY20. However, given the significant revenue skew in Q1FY20, which was circa 31% (unrelated to portfolio seasonality), the underlying volume decline was at 14% on a year-on-year basis.
Market share gains in more than 90% of the portfolio
Secondary volume growth was in line with the reported primary volume growth. The company continued to operate at lower distributor inventory levels after the drop at the end of Q4FY20, to protect channel partner ROIs in the current environment. The company gained market share in more than 90% of the portfolio on a MAT basis, accentuating gains during Q1.
With social distancing becoming increasingly prevalent, consumers favored neighborhood GT stores and eCommerce platforms over modern trade during the quarter. The Canteen Stores Department (CSD) business during the quarter was nearly reduced to its half, which had a meaningful impact on India’s overall volume growth.
Bangladesh grows in double-digits
The company states that while the international business de-grew by 4% in constant currency terms, Bangladesh continued to hold the fort by delivering a commendable 10% constant currency growth. Other geographies recorded double-digit drops.
Operating Margin up 300 basic points
EBITDA was up 1%, led by 300 basic points expansion in operating margins, which was attributable to softer input costs, rationalization of administrative and personal (A&P) spends in discretionary portfolios, and very aggressive cost control. PAT was at Rs 331 crore, up 3% YoY on a like-to-like basis. A&P spends stood at 7.1% of sales, given the rationalization of spends in a subdued demand environment with supply constraints. After minimal spending in April, the company continued to invest in the core portfolios in light of improving traction during the rest of the quarter. Similarly, trade spends during the quarter was also rationalized accordingly.
Since the business has recovered to near-normal levels and growth trends have been improving from May, the company will strive to sustain the momentum and deliver growth in the balance part of the year, provided the ongoing COVID-19 crisis doesn’t drastically worsen in the times to come. The company expects operating margins to be circa 20% for the rest of the year.
Other updates
• Marico has been recognized amongst India’s 5 Best Workplaces in FMCG as per a study conducted by Great Place to Work Institute (India) in association with The Economic Times.
• Marico ranked as the 7th Most Preferred FMCG or beverage company amongst B-school students and one of the 25 most desirable companies to work for across sectors, as per the Dare2Compete Employer Branding Report 2020.
