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Low single-digit decline in revenue on a YoY basis

Please find below the key highlights from Marico (MRCO)’s 3QFY24 prequarterly update:

Macro view: Trends remain similar QoQ; new age channels do well

* The consumer sector’s demand trends are similar to the last quarter, with urban markets remaining steady and rural showing signs of improvement.

* The constraints on liquidity and profitability in the general trade (GT) channel remained an overhang, while alternate channels continued to do well.

* The management is optimistic on the recovery in CY24 led by continued government spending and price cuts across categories.

Consolidated revenue declines by low-single digits

* Domestic volumes grew in low single digits YoY, with a slight sequential improvement in the core portfolio.

* Towards the end of the quarter, the company took significant steps to improve the ROI of its GT channel partners and reignite growth in the channel structurally. This includes stock correction for the channel partners.

* Consolidated revenue declined YoY by low-single digit due to pricing corrections in key domestic portfolios and significant currency depreciation in some overseas markets. Revenue grew 2% YoY in 3QFY24 (vs. a decline of 0.8% YoY in 2QFY24); MRCO reported a four-year revenue CAGR of 7.3%.

International business: Mid-single digit growth in constant currency terms

* In 3QFY24, MRCO’s international business delivered mid-single-digit growth in constant currency terms.

* International markets are strong except Bangladesh.

Costs and margins: Gross margin to expand

* RM costs – Copra and edible oil prices remained at lower levels and crude derivatives also displayed downward trends.

* Moderating RM costs would lead to expansion in gross margin YoY.

* A&P spending continued to increase for strategic brand-building of core and new categories.

* Management expects low double-digit operating profit growth and the company is well on track to achieve its margin guidance for the full year.

Segments

* Parachute Coconut Oil registered a low single-digit volume growth, with loose to branded conversions trending positively.

* Saffola Oils had an optically weak quarter owing to a high base and persistently cautious trade sentiment, even while off-take remained healthy.

* Value Added Hair Oils posted low single-digit value growth amid sluggishness in the bottom-of-the-pyramid segments of the portfolio. Foods and Premium Personal Care scaled up well.

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