Staid performance by Marico in 2QFY01 - Views on News from Equitymaster

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Staid performance by Marico in 2QFY01

Oct 24, 2000

Edible oils major, Marico Industries has recorded a 10% growth in its 2QFY01 bottomline. This growth comes on the back of a 5% decline in turnover during the same period.

(Rs m)2QFY002QFY01Change1HFY001HFY01Change
Sales 1,712 1,631 -4.7% 3,062 3,099 1.2%
Other Income 2 7 363.3% 4 13 196.5%
Expenditure 1,548 1,466 -5.3% 2,812 2,772 -1.4%
Operating Profit (EBDIT) 164 165 0.3% 250 327 30.7%
Operating Profit Margin (%)9.6%10.1% 8.2%10.5% 
Interest 8 9 3.7% 12 19 57.9%
Depreciation 19 22 14.2% 34 50 46.7%
Profit before Tax 138 141 2.2% 208 271 30.0%
Tax 20 11 -41.8% 30 23 -22.7%
Profit after Tax/(Loss) 119 130 9.5% 179 248 38.7%
Net profit margin (%)6.9%8.0% 5.8%8.0% 
Earnings per share*- -   24.7 34.2  
(annualised)      
Current P/e ratio      7.4  

The company's product portfolio includes well known brands like Parachute (coconut oil), Saffola and Sweekar (edible oils), Revive (Starch) , Sil (jams) and Hair & Care (non-sticky hair oil).

If we consider Marico's first half results in totality then, the company has put in a reasonably good performance. Though the company's turnover did not show much growth (up only 1%), Marico's bottomline surged 30% in 1HFY01.

The company's bottomline has surged largely on account of lower tax provisioning and lower raw material costs. In fact copra (a key raw material) prices were down 36% on an average. Though the company's turnover has not shown much growth in value terms, all the company's major brands have registered good volume growth in 1HFY01. Parachute grew by 6%, Saffola by 20% and Sweekar by 11%. The volume growth was not reflected in the turnover as the company had reduced its retail prices on competitive pressures.

Faced by the competitive onslaught by HLL, Marico not only cut prices, but also upped its advertising and promotional expenditure. In fact, its advertising expenses were 11.6% of 1HFY01 turnover. This is high when compared to 7.8% (advertising/sales) in 1HFY00.

Marico's stock currently trades at Rs 253, which is 7.4 times its FY01 earnings. Given the competitive pressures it faces, it has an uphill journey ahead.

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