Competition takes toll on Marico's bottomline - Views on News from Equitymaster

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Competition takes toll on Marico's bottomline

Apr 27, 2000

Marico Industries has posted a 5% drop in its net profits to Rs 357 m on a turnover of Rs 6,483 m for the FY2000 over the previous period. The intense competition in the domestic branded oil market, had resulted in increase in company's operational expenditure directly impacting its bottomline. The company has significantly stepped up advertisement and sales promotion expenditure for the new products launched in the current year as well as the existing product range. This has resulted into decline in its operating profit margins to 8.1% in FY2000 (9.3% in FY1999). Also as a result of steep decline in prices of most edible oils, Marico had to reduce retail prices of refined edible oils negatively impacting company's profit margins.

The company's export sales grew by 23% over the previous year.In order to optimally tap the potential offered by Bangladesh, the company set up a wholly owned subsidiary in Bangladesh which commenced local operations during the year.

Marico's flagship brand Parachute showed a healthy volume and value growth and maintained its market share in the difficult market conditions. The brand has faced stiff competition from HLL's Nihar and Dabur's Vatika Hair Oil.

(Rs m) FY99 FY00 Change
Sales 5,512 6,483 17.6%
Other Income 19 12 -34.8%
Expenditure 5,001 5,960 19.2%
Operating Profit (EBDIT) 511 523 2.5%
Operating Profit Margin (%) 9.3% 8.1%  
Interest 37 32 -13.0%
Depreciation 52 78 49.4%
Profit before Tax 440 426 -3.3%
Other Adjustments - 18  
Tax 65 51 -22.5%
Profit after Tax/(Loss) 375 357 -4.7%
Net profit margin (%) 6.8% 5.5%  
Earnings per share 25.87 24.64  

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