Emami Ltd.'s second-quarter profit dipped, while its margins contracted on the back of a rise in ad spending amid high inflation.
The consolidated net profit of the maker of BoroPlus and Zandu Balm fell 1 percent over the previous year to Rs 184.2 crore in the quarter that ended September, according to its exchange filing.
That compares with the Rs 176.61 crore consensus forecast of analysts tracked by Bloomberg. Its profit beat estimates due to the lower tax rate and higher other income.
The tax rate during the quarter was 3 percent versus 8 percent last year. Profit before tax and exceptional items fell 18 percent to Rs 185.5 crore, due to inflation in input costs and low base during the Covid-19 period, inclusion of new subsidiary costs, upfront marketing investments and strategic outlays on distribution expansion in rural, digital and modern trade channels.
Emami Q2 Key Highlights (YoY)
"Consumer demand remained muted across markets with high inflation affecting consumption, especially in the rural markets," said Mohan Goenka, vice-chairman and whole-time director, Emami.
The firm witnessed a correction in the Covid-19 contextual portfolio of pain management and healthcare products, which grew significantly during the last two years.
The three-year CAGR has been growing 8 percent compared to pre-pandemic levels.
BoroPlus sales grew by 17 percent in Q2 as the company roped in Bollywood actor Akshay Kumar to endorse BoroPlus Antiseptic cream. Navratna range sales declined 5 percent while the male grooming range reported a 2 percent increase in sales.
Sales were corrected by 13 percent for the pain management range, which includes the Zandu Balm brand. The segment delivered growth of 20 percent in Q2 compared to the pre-Covid period (Q2 FY20). The healthcare range also saw sales correction by 16 percent in Q2, growing 34 percent in Q2 compared to the pre-Covid period.
D2C portal Zandu Care performed well, despite a drop in demand for immunity products, however, sales fell 10 percent for the Kesh King range. The company attributes this to a high base of 28 percent growth over the last two years (Q2 FY22 and Q2 FY21).
Both modern trade and e-commerce performed well to post a growth of 28 percent and 55 percent, respectively. The contribution of modern trade and e-commerce channels increased to 16.5 percent of Emami's domestic revenues.