Marico Ltd, the company that sells Parachute and Saffola branded vegetable oils, said it expects "double-digit growth" in its profit for the three months ended June due to a decline in costs, despite poor rural demand.
"Demand trends in the sector remained stable during the quarter, although signs of improvement on a sequential basis were not clearly visible. While urban markets were steady, the anticipated pickup in rural demand remained elusive," the company said. However, it added that it continues to be hopeful of a gradual recovery in rural demand due to various factors, such as moderating headline inflation, an increase in minimum support prices for crops, easing liquidity pressures and forecast of a near-normal monsoon.
The company said it expects strong improvements in its profitability due to a sharp decline in raw material prices. Copra prices stayed in a favourable zone [during April-June] and edible oil prices declined sharply, while crude derivatives remained firm," it said.
Because of this, gross margin -- a measure of profitability arrived at after deducting direct manufacturing costs -- is expected to expand materially on a year-on-year as well as on a sequential basis, the company said.
However, the company has increased its advertising and promotional expenses during the three months ended June, and this would offset some of the benefits. Overall, the net profit of the company for the period would expand by double digits.
"The business has exhibited a healthy margin upside..the company remains confident of resuming an upward trajectory across key growth parameters from hereon," it added.
Meanwhile, on the revenue front, there was a fall of low-single digits on a year-on-year basis. This was due to a 30% decline in prices for Saffola edible oils.
During the quarter, the performance of the domestic business was affected by significant trade destocking in Saffola Edible Oils in reaction to sharply falling vegetable oil prices.
Domestic sales volumes grew in "low-single digits", with a minor volume drop in Parachute coconut oil, low double digit volume growth in Saffola edible oils and flattish quarter for value added hair oils, the company said.
It said that among the newer products, foods continued its strong run, while Premium Personal Care (including Digital-First portfolio) remained steady.
"While primary volume growth was marred by one-time internal and external factors mentioned above, we expect a visible pickup from the coming quarter given the sustained healthy trends in offtakes, market share and penetration across our key franchises," the company said.
The company's international business maintained its healthy growth momentum as it delivered high single-digit constant currency growth during the quarter, with most geographies exhibiting resilience in a volatile global operating environment, it added.