See margin pressures going forward: Marico

Excerpts from CNBC-TV18’s exclusive interview with Milind Sarwate:

Q: What has the margin picture been? What is your operating profit margin?

A: The OPM in the corresponding quarter last year was about 14%. This time it has dropped to about 12.6-12.7%. There is a tremendous cost-push in the economy and Marico has not been an exception in terms of material cost. However, we have taken it as some kind of an opportunity. We have maintained our advertising spend and have pushed it up by about a percentage point from 10-9-11.9%. So, almost 12% has been our advertising and sales promotion spends.

We had to grapple with increase in raw and packing material cost lead by the crude oil, inflation and advertising strategy that we consciously followed. We have been able to manage costs elsewhere quite well, although we have kept employee cost again at the same level as last year. Our overall operating margin has dropped by about 1.5%.

While the economy slows down and there is a lot of noise going on, we need to focus on the long-term, because over the past two-three years we have gone into several new territories, areas, products, services, and countries etc. We are building a long-term sustainable platform for growth and should not let go of it despite short-term issues.

Q: How do you expect sales to pan out for the rest of the year? Can we assume that you will continue to maintain this 20% growth for the rest of the year?

A: It is 28% not 20%, because from Rs 469 crore last year we are now at Rs 601 crore this quarter. We may be running at about Rs 2,400 crore annualized, but it is very difficult to project sales at this time in the year. Last year, we closed at Rs 1,907 crore. We should see a healthy turnover growth this year, simply because we have been investing in our brands and getting into several territories in and around our existing categories.