This, along with lower realisation amid price correction in Parachute rigid and a 5 per cent fall in international business sales (22-23 per cent of consolidated revenue), resulted in a 7 per cent year-on-year (YoY) fall in the top line to Rs 1,496 crore, lower than the Bloomberg Consensus estimate of Rs 1,538 crore.
Stable input costs and lower advertising spends, however, saved the day for Marico
and protected its profitability. Marico’s earnings before interest, tax, depreciation, and amortisation (Ebitda) margin increased by 58 basis points YoY to 18.9 per cent in Q4. This also contained the impact on the top line, with Marico’s pre-tax profit declining 3 per cent YoY to Rs 262 crore versus analysts’ estimate of Rs 267 crore.
The net profit decline of 50.6 per cent to Rs 199 crore was because of tax credit in the year-ago period and Rs 10 crore of exceptional items in Q4FY20, thus not strictly comparable.
What is also positive is the management’s confidence of maintaining FY21 operating margin at the FY20 level of around 20 per cent, led by robust cost-cutting, such as advertising spends.
"Supply disruption in the domestic market and a likely slower recovery in hair oil would affect revenues in FY21; growth is expected only in FY22," says Kaustubh Pawaskar, analyst at Sharekhan. But, without top-line growth, earnings may not grow, if not shrink.