Marico will post double-digit constant currency growth for rest of FY20: Vivek Karve, CFO

Parachute coconut oil growth has been very good in the first quarter of fiscal 2020, says Vivek Karve, Chief Financial Officer, Marico Limited. During an interview with Abhishek Satya Vratam, Zee Business, Mr Karve said, the benefit of copra prices decline has been passed on to consumers in a tactical way. Edited Excerpts:

Q: Marico has posted good quarterly numbers in June quarter. But copra prices were the key highlight that reduced more than 20% and helped the margins. Did it had any impact on your volume and will you pass on its benefit to the consumer?

A: If you see our overall growth, then the growth of Parachute coconut oil is very good. In terms of volume, parachute coconut oil has grown by 9%. You were true that Copra prices had declined, YoY and sequentially. We have passed on its benefits to the consumers in a tactical manner. Besides, we also had a focus on direct distribution and rural areas, which helped us in increasing parachute growth by 9%. But, other coconut oil brands like Nihar, Oil of Malabar – termed as price warrior brands - have declined under the deflationary environment. But, the focused portfolio of Parachute Rigid bottles has grown by 9%. However, Copra prices are likely to increase in Q3 and Q4 from current levels but will continue to play tactically under this deflationary environment to benefit the consumers. Besides, our gross margin has grown by about 500 basis points, therefore, our EBITDA growth is also very healthy and stands at 26%.

Q: Margin, as well as EBITDA, have improved, and raw material costs have been favourable for Marico. What is your outlook, and do you think that you will be able to improve or sustain margins?

A: Rightly said that raw material prices in the current quarter have gone down by almost 25% as compared to the same period of last year. It has contributed to increasing our gross margin and also translated into EBITDA growth. If you have a look at Bangladesh’s profitability, then raw material prices have also gone down there as well, and this has contributed to making our gross margin and EBITDA margin healthy. Going forward - in terms of consolidated business - we will be able to post a 20%+ EBITDA margin for the rest of the year.

Q: Your volume growth came in at 6% in the June quarter. What are your future projections, and will good monsoon can have any positive impact on domestic volumes?

A: Economic growth momentum is very slow in India at present and in its backdrop, our mid-term growth plan - volume-wise - stands between 8-10%. But, having an eye on overall macro scenarios, I think that our Indian business will be able to grow by 6-8% in product volumes. As far as international business is concerned then double-digit constant currency growth because the foreign exchange keeps moving up and down and that’s why it typically reports a constant currency growth. And, we expect that we will be able to post a double-digit constant currency growth for the rest of the year.