Marico posted a largely in-line set of first-quarter earnings. The domestic volume growth came in at 21 percent but gross margins dipped hit by high raw material prices. To talk in detail about the earnings and outlook going forward, CNBC-TV19 spoke with Saugata Gupta, MD & CEO, Marico
The management acknowledged the May slowdown impact due to the coronavirus second wave lockdowns. Recovery started in June and July was better.
“I believe now we have started lapping higher growth rates and for the balance year, we would be happy if we are going to deliver 8-10 percent volume growth,” said Gupta.
When asked why margins were compressed, he said that the first quarter was unprecedented. "That led to contraction and also the fact why we kept on increasing prices,” he said, adding that copra prices have started coming down.
While extreme volatility continues in vegetable oil, another key raw material for the company, the second half of the year should see the deflationary phase coming in.
“Sequentially there has been significant improvement in margins and therefore our ability to deliver 19 percent plus over the second half of the year should be possible,” said Gupta.
With regards food business and contribution to margins, he said, that food makes lower gross margins. "In food, we have to chase scale and cannot do niche. There is opportunity in terms of honey, soya nuggets, and oodles – all to reach Rs 100 crore within a 2-3 year period since launch," he said.
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Contribution from the new engines of growth -- food, premium hair nourishment, D2C brands -- should increase revenues by 10-15 percent over the next 4-5 years.
“As an organisation we believe in driving volume growth, we believe margins will automatically come with scale but it will certainly be a far more diversified portfolio 4-5 years from now,” said Gupta.
Watch the full interview for more details