Gross Margins Could Remain Under Pressure This Quarter, Says Marico

Key input costs have started easing after peaking at the start of this quarter, however, gross margins will remain under pressure in this quarter due to consumption of higher cost inventory and will improve from Q2 onwards, Marico has said in a business update.

Marico has a portfolio of brands such as Parachute, Saffola, Saffola FITTIFY Gourmet, Saffola ImmuniVeda, Hair & Care, Parachute Advansed, Nihar Naturals etc.

"Operating margins should see significant sequential improvement in Q1 due to higher operating leverage and trend towards medium term expectations. However, operating margin in the quarter will drop sharply on a year-on-year basis, given the exceptionally high base of 24.3% (due to rationalisation of A&P spends and other overheads in the base quarter) and the arithmetic (high denominator) effect of significant pricing-led growth. Owing to the above, the Company expects muted bottom line growth in the quarter," Marico said in a release.

"We are seeing improving demand trends, as the second wave appears to be receding and the vaccination drive is progressing steadily. While there are apprehensions of a third wave, the Company is adequately prepared to tackle any disruptions in the business environment resulting from the same, given a large majority of our own members and all extended third party resources have received the first dose of vaccination. The Company maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term, enabled by the strengthening brand equity of its core franchises and new engines of growth reaching critical mass," the company further added in a release.