Marico expects profits to rise 10-11 pct in FY12

Consumer products maker Marico Ltd expects a 10-11 percent jump in profit in the current fiscal year ending March 2012 on a sales growth of 23 percent, even as rising costs hurt consumer spending and affect margins, according to information from a company source, and confirmed by the company on Friday.

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"This is what we are hoping to achieve...We had put out a statement earlier as the market was putting out expectations above what we felt we could achieve," the company source, who did not wish to be identified, said.

Earlier this month, the company had said its post-tax profit in upcoming quarters may fall short of market expectations due to rising costs and continued uncertainty in the global markets.

The company, which makes the 'Parachute' range of hair products and edible oil brands such as 'Saffola' is expected to achieve net profit of 3.36 billion rupees in FY12, a jump of 16 percent from the same period a year ago, and a 23 percent jump in revenues to 38.6 billion rupees, according to Thomson Reuters I/B/E/S estimates.

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Marico posted a net profit of 2.86 billion rupees on net sales of 31.28 billion rupees for the fiscal year ended March 2011.

The consumer products maker also said it expects EBITDA margins to remain between 11-12 percent in FY12.

"Volume growth will be protected but margins will remain under pressure...copra prices have risen over 80 percent year-on-year," the source said.

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Copra - coconut kernel- is a major raw material for the firm.

Marico had earlier said it expects operating margins to get affected due to mounting raw material costs and higher advertising and promotional spend after a slew of new product launches.

However, the firm, which has taken several price hikes in the past, had said it does not plan to go in for further price increases despite a sustained jump in input costs, in order to focus on volume-driven growth.

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Marico's skin-care business, Kaya, which is expected to break even in FY13, expects to clock same-store sales growth of 10 percent in FY12.

The company also aims to open 5 new Kaya clinics in FY12.

"We have opened 2 stores already , 1 in India and 1 in the Middle East. We have plans of opening three more across India and the Middle East," he said.

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The firm, which had announced setting up of its Bangladesh plant early next year, has revised the investment in the plant upwards to 350-400 million rupees from the 200 million rupees stated earlier, the source said.

Marico's international business contributes 23-24 percent to overall revenues.

However, its margins in its international operations will come under pressure as they are unable to increase costs due to pressure from local authorities in the North Africa and Middle Eastern markets.

"Egypt has stabilised but it's still a wait-and-watch on how the MENA story unfolds," the source said.

The firm had earlier said its business in the Middle East and North African (MENA) markets, which contribute 5 percent to its overall sales, remains uncertain along with forex fluctuations impacting its overseas business.

Shares of the company, which have risen 20 percent since the start of the year compared to a 19 percent fall on the main index, at 10.33 a.m., traded 0.87 percent up at 145 rupees in a weak Mumbai market.