Conference Call between Marico Limited Management and Analysts to discuss Q4FY20 and Full Year Earnings and Outlook. Listen in to the full transcript.
Call Participants: Mr. Saugata Gupta – Managing Director & CEO, Mr. Vivek Karve – CFO
Key Highlights
As consumers are likely to be more value seeking post Covid, we will have stronger play at the bottom of pyramid and the core segment to drive volume growth and market share
Having said that, we will continue to have a strategy over the medium term, gaining market share in the premium segment led by aloe vera and dry food oils while we are seeing healthy traction in the top-end especially in digital trade and e-comm
Saffola continued its healthy run from the previous quarter and delivered a sale of 25% on a very strong base against 18% growth last year, similar quarter. It is partly aided by the pantry-loading and households stocking up on food and essential items in the early stages of the COVID-19 outbreak which accelerated the performance of Saffola in Jan-Feb
Given the increased awareness towards health, Saffola products find themselves in sweet spots. The surge in the home cooking will lead to a trend in eating healthy and higher consumption of healthy and trusted brands
Saffola is well placed to ride this year on health awareness and it continues to consolidate its position on the health platform
Backed by media, effective communication and shift in consumer behaviour, especially among consumer households, cooking has really doubled. We are extremely confident of driving double digit growth for Saffola
In food, oats rallied in the quarter with a 23% value growth. We will drive innovations with new flavours in masala oats which suits the various regional pallets and continue to win the brand value
We also see opportunities for FITTIFY Gourmet and Coco Soul in their respective niches and we continue to move it in packaged foods to serve healthy in-home consumption needs of our consumers in the post-covid world
Our discretionary personal care portfolios of serums, male grooming and skin care have understandably not been favoured as consumers prioritized essential items of daily use in the day leading to the lockdown
These categories have been understated since they are relative non-essentials and are low even in the month of April. We are running a low value small pack category to allow consumers to extract some of these offerings in a slow economic environment in addition to focusing on ecomm and chemist outlets to drive consumption of the top end. Therefore, we have reduced our investments in these categories and channelise the energy towards the directive share gain in our core categories along with focus on health, hygiene and nutrition which consumers are strongly gravitating towards in the current context and we will continue to do so in the post-covid world
We have launched hand care sanitizers in April and we are looking to broadening our play in sustainable portfolio in the near future
A similar initiative on health and hygiene has also been driven in Bangladesh and some of the other key markets
Coming to international business, Bangladesh was able to post growth since it was impacted only once the lockdown in the country was imposed in the last 4-5 days in March
The business continued to perform led by a non-coconut oil portfolio. Vietnam also ended in green as the country limited restrictions in the quarter
We have launched hand sanitizers in both the markets to help consumers fight against the pandemic
Both MENA and South Africa had a tough quarter given already standing macros and severe impact in primary due to Covid led restrictions
Secondary sales in Middle East declined with single digits as compared to the huge primary decline because we couldn’t export the stock transport over the last few days
We are optimistic of the recovery of all ground in Bangladesh, Vietnam and the Middle East over the course of FY21 as per the initial trends which should enable international business to stay on the growth path from Q2 onwards
We aim to clock an organic broad-based double-digit constant currency growth and maintain operating margins at circa 20% over the medium term.
With considerable room for organic growth in the business, the Company will only be opportunistic with respect to acquisitions, which may either be immediately value accretive due to operating leverage or enable consolidation of leadership in existing categories.
Key Shifts in Consumer Behaviour which we have been agile enough to respond effectively to:
The rising consciousness towards the health, hygiene and the need to boost immunity, high incidence of in-home cooking or gravitation towards healthy ready to cook and ready to eat - cutback on discretionary categories are doing a rather prolong macro slowdown
Consumers are likely to be more value-seeking but will still prefer trusted leader brands so the acceleration in online shopping and online media consumption and recovery and the growth of the kirana shop are expected
Therefore, we need to focus on five things to come out unscathed from this crisis 1) The portfolio to capitalise on change in consumer trends and preferences with launch of products in nutrition, hygiene and well-being in the current environment. 2) Secondly, the severe disruption in the supply chain has given rise to a number of alternative last mile logistical options with new operating models. We have been proactively prioritising these and have been introducing direct home delivery portals for edible oils and foods in selected cities to ensure uninterrupted supply of food and grocery items of daily use towards customers across all channels. 3) Thirdly, we will be selective on A&P while we reallocate spends from non-media to media channels in the near term to drive share of voice in core products. Spends on the digital platform will be on the rise to further boost our business, this currently contributes to more than 5% of spends already. 4) Fourth, we are being aggressive on managing costs across the organization. We have been challenging every cost element 5) And last but not the least, transforming the workplace and being future-ready. We are already exploring aggressive work from home and automation programmes which complement the new millennium way of working
With some of the restrictions in the areas that are not identified hotspots and are away from city centers, the availability of manpower and supply chain operations have improved over the last few weeks
Production has resumed in all our manufacturing units although at a reduced scale
We are focussing at our movement of all food and grocery items of daily use to the consumers subject to necessary approvals from the local government authorities
We are back to recording 70-80% of our normal monthly run rate of FY20 as lockdowns ease up. However, in the near term, demand and market growth is expected to be volatile and is difficult to have a view of the coming year until more clarity emerges in the coming Q1 and Q2
With tight cost management, the company is trying to maintain the operating margin in FY21 which is currently around 20%
We have had two relatively uninspiring quarters in Q2 and Q3. I strongly believe that our coping ability has increased tremendously which will help us in navigating through this crisis
Conference Call with Redington India Management and Analysts on business updates and outlook for the company. Listen in to the full transcript.
Conference Call with ICICI Lombard General Insurance Management and Analysts on Q4FY20 Earnings and Outlook. Listen in to the full transcript.
Highlights
On the call
Bhargav Dasgupta MD CEO
Gopal Balachandran CFO
Sanjeev Mantri and Alok Agarwal, Executive Directors
Management Comments
Comments from the MD
The limits on the contagion in India is leading to significant economic impacts. We have reorganized the business to keep operations going, and are experiencing entire insurance process in digital mode. At the purchase stage they can transact through web, mobile etc. Over 96% of our policies issued are digital form, and online inspection of claims (InstaSpec) allow realtime claim assessment and processing. During the lockdown we used InstaSpec on 100% of our cases. For policy servicing and query resolution we encourage customers to do this digitally. More than 50% of customers calling call centres prefer the digital option when that is given.
Introduced dedicated product COVID-19 protection cover providing 100% of sum insured on first diagnosis of the virus. We have tied up with flipkart, bharatpay etc to offer this service. We have also introduced a teleconsulting feature on our app for customers. We saw a 50% increase in the base usage here since the start of the lockdown.
Our channel partners are an important part of our strength, and we have focused on customer retention for our partners, and we have provided robocalling and CRM tools for our dealer partners, and other tools for sourcing and acquiring customers, with training programs to quickly bring them up to speed during the lockdown.
April-May are when we run the Udaan program for our MSME customers. We have done this digitally this time.
Management is forgoing 50% of bonus and upcoming increments in light of COVID.
Introduced free COVID-19 testing for underprivileged communities
The authority has notified on March 27 2020 that companies will continue to charge prevailing rates for motor third party liability insurance until further orders. This will impact margins and growth.
They also announced further relaxations in payment of premiums and renewals till May 15 2020. Subdued auto sales and temporary shutting of OEMs in auto may also impact future growth in this segment.
The board of directors has not recommended a final dividend for FY2020.
Our solvency ratio is 2.17 times as of March 31st 2020, and continues to be well above the regulatory requirement of 1.5x.
The general insurance industry overall registered a growth of 11.7% in the year over previous year. Excluding crop segment this growth would be 10.7%.
Outlook: it is extremely difficult to guage, since we don't have much of an idea yet of the exact economic damage and impact. Giving a guidance at this stage would be misleading. But will still share current view.
Commercial: We expect the fire portfolio to grow reasonably well. However marine and engineering may see degrowth due to reduced transit of consignments. Policy extensions due to working health issues. Group health penetration should increase. We expect rural segment to see fast turnaround post lockdown. Idle plants and construction projects may recover post lockdown. Demand for pandemic cover should rise - currently not prevalent in India.
Retail: Motor portfolio growth will get impacted. We expect lower impact on agency and POS channels due to higher focus on renewals. We expect subdued growth in retail health indemnity in Q1FY21. We expect health agency to keep growing. We expect muted growth however in Banking/NBFC. Travel segment will be most impacted. MSME may see growth with more digital adoption.
