January 31, 2020

Microfocus

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Marico slips 6%, hits 52-week low on disappointing December quarter results

Shares of Marico slipped 6 per cent to Rs 318 on the BSE on Friday...


Shares of Marico slipped 6 per cent to Rs 318 on the BSE on Friday after it reported 5 per cent year-on-year (YoY) decline in its domestic business revenue at Rs 1,380 crore in December quarter (Q3FY20), amid the bleak consumption sentiment, especially in rural area. The India business recorded a volume decline of 1 per cent.


The stock of the fast moving consumer goods (FMCG) company hit 52-week low today. It was trading at its lowest level since October 31, 2018.


In Q3FY20, consolidated revenue from operations was down 2 per cent YoY at Rs 1,824 crore. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin expanded 116 basis points (bps) to 20.4 per cent, owing to benign input costs. Profit after tax (PAT) grew 11 per cent due to lower tax expense.


Persistent liquidity constraints in the traditional channel, especially wholesale and in rural, led to further correction in trade channel inventories, impacting secondary growths, which were in low single digits, the company said.


In addition, as the company reduced distributor stock positions in urban GT to support ROIs in this subdued environment, reported primary growth was pushed into the negative zone, it added.


On outlook, Marico said with no visible uptick in the overall demand and consumer sentiment so far, offtake growth in personal care categories slowed through the year, while categories with a higher rural skew decelerated into a decline. Operating margin is expected to be maintained at 18-19 per cent over the medium term, it added.


On the macro front, the management stays optimistic of a gradual recovery by H2FY21, given the government stimulus in play and expectations of further impetus to consumption from the upcoming Union Budget, especially against the backdrop of normal monsoons last year.



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