Marico Industries announced a 28% jump in net profits for FY01 today. The company's total income however, was marginally up by 2%. But its 4QFY01 net profit was up by a marginal 6%. The company announced a final dividend of 60%, taking the total dividend paid for the year to 100%.
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The company is the market leader in the Indian coconut oil and branded refined oil segment. Its brand Parachute dominates the branded coconut oil market with a 54% market share. Marico's presence in the refined oil category is marked by two brands, namely, Saffola (safflower oil) and Sweekar (sunflower oil). These command a combined market share of 13% in the branded edible oil market.
Market Share (%)
Hair & Care
Non-sticky hair oils
Value added coconut oils
Souce: ORG Marg retail data in November 2000
The company improved its performance in volume terms. For FY01, volumes of Marico’s coconut oil franchise (Parachute and Oil of Malabar) grew by 14%, while the refined edible oil franchise (Saffola and Sweekar) grew by 27% YoY.
According to the company, the growth in volumes was, however, not reflected in a similar growth in turnover because of two reasons. Firstly, during the nine months ended December 2000, maximum retail prices (MRPs) of most Marico products were lowered following considerably lower raw material prices. Secondly, the turnover value excludes the turnover recorded by Marico Bangladesh Limited (MBL), a wholly owned subsidiary. During FY00, turnover in Bangladesh was recorded in Marico right until December 1999, when MBL commenced its operations. If we exclude the MBL performance then the company's turnover grew by 15%.
The company's bottomline growth would have been much better but for a slowdown in profitability in the 4QFY01. This is because its expenditure shot up by 6% during the quarter. In the previous 9 months of FY01 its expenditure had actually declined by 1.4% YoY. Marico's staff costs have gone up by a significant 51% in 4QFY01 (YoY) as compared to a 37% jump in FY01.
The company's advertising expenditure has shot up by 36% during FY01. The company's advertising expense to sales was 12% in FY01 as compared to 9% in FY00. The company has had to up its ad budget to fight the slowdown in consumption as well as to fight off the challenge from Hindustan Lever Limited.
At the current price of Rs 221, the stock trades at a P/e multiple of 7 times its FY01 earnings. The markets have taken the slowing growth in Marico's bottomline in 4QFY01 with a pinch of salt.
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