Emami bets on winter, but inflation may bite
Inflation poses a significant threat to demand growth, despite improving consumer sentiment and rural demand, according to Harsha Vardhan Agarwal, vice chairman and managing director of Emami Ltd. Speaking after the company's quarterly results announcement, Agarwal stated that demand could potentially surge further if inflation remains under control.
The rise in input costs has forced the company to increase product prices, but Emami has started to witness promising developments in the winter portfolio, with trade sales on the rise. "Rural demand is consistent. Had the monsoon been normal, our second quarter results would have been even better," Agarwal remarked. The company, known for producing BoroPlus and Zandu Balm, reported a 36% year-on-year increase in consolidated revenue to Rs 1,088 crore for the second quarter ended September.
The domestic business experienced a 49% growth, driven by a 43% volume increase. However, the overall net profit decreased by 3% to Rs 144 crore due to the normalization of the effective tax rate following the discontinuation of fiscal incentives. Earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 25% to Rs 222 crore.
The challenging operating environment in the quarter included renewed geopolitical tensions in West Asia, floods in Nepal, persistent inflationary pressures, and deficient rainfall in certain regions. Agarwal revealed that Emami raised prices by 4-5% in the first half of the fiscal year and is implementing cost-efficiency measures to absorb the remaining input cost increases.
The company's skin care business expanded by 31%, hair care expanded by 30%, and healthcare grew by 11%. Its strategic investments portfolio increased by 73% on a like-for-like basis and now accounts for 26% of the domestic business, up from 8-9% a year ago. The portfolio, comprising newer-age brands and businesses acquired by the company, is expected to generate revenue of over Rs 800 crore in the current fiscal, highlighting its growing contribution to Emami's overall business.
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