Analyst meet

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Information about Analyst meet

Published on April 17, 2008

Author: Janelle


Marico Industries Limited:  Marico Industries Limited Analyst Meet April 22, 2004 Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook What we said last year.. Analyst meet - May 14, 2003:  What we said last year.. Analyst meet - May 14, 2003 FY 03 was a tough year, but we held our record FY 04 is also special as we Get into an Investment Phase Move towards new/ higher value adding businesses/ products This cusp is Crucial for Marico and its stakeholder value Let us see what we did last year…………….. Slide5:  FY04 FY03 Sales 880 775 13% PBT 73 64 14% PAT 67 56 19% Rs.Crore Consumer Products -FY04 Slide6:  Consumer Products -Q4FY04 FY04 FY03 Sales 222 201 10% PBT 16.7 14.5 15% PAT 18.8 16.0 17% Rs. Crore Slide7:  FY04 FY03 Sales 887 775 14% PBT 65 64 2% PAT 59 56 5% Rs. Crore Group -FY04 Slide8:  FY04 FY03 Sales 225 201 12% PBT 14.4 14.2 1% PAT 16.5 15.8 4% Rs. Crore Group -Q4FY04 Slide9:  Consistent Performance Year on Year Growth 14th consecutive quarter for Turnover 18th consecutive quarter for Profit Payout Over 50 % of PAT Dividend Yield ~ 3.4% at today’s price 13th consecutive quarter for Dividend Group Financials:  Group Financials Economic Value Added grew by 24% Rs. 31 cr to Rs. 39 cr Compared to FY 03 Impact of new businesses 100% consolidation for line items Operating Margins Comparison with FY 03:  Operating Margins Comparison with FY 03 Exceptional items in FY 03 Other Income Deferred sales Tax Income Rs 3.2 Cr Compensation from P & G Rs 4.6 Cr One-time Depreciation Rs. 7.8 Cr Margins % are impacted by sales value increases Margin per unit of volume have improved Operating ROCE has in fact improved 39 % vs 33 % in FY03 Capital Utilisation:  Capital Utilisation ROCE up Major Capex-New Hair Oil Unit in Dehradun Hair Oil industry de-reserved in FY04 Fiscal benefits First off the block amongst FMCG- December -03 Key Performance Drivers- FY 04:  Key Performance Drivers- FY 04 Portfolio realignment Stronger Established Franchises Volume Growth across categories Consolidation of Market shares Stronger Flagship brands - Parachute & Saffola New Engines Sustained growth in International Business New Products - Growing portfolio Nurturing of new business - Kaya & Sundari Portfolio Realignment:  Portfolio Realignment Margins Volume Growth + - Hair Oils Shanti, Jasmine, H&C Parachute CNO Saffola Sweekar OOM Low High Mediker Revive Higher focus on the High Margin Products Volumes up 11% Volumes down 14% Sil Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook Business Model:  Business Model Focus on FMCG Step up value add continuously Turnover only in branded goods / services Portfolio rejig towards High Margin New Product Stream - Aggressive prototyping Sustain competitive advantages - Branding, Distribution, Costs, Innovation & R&D Business Segments:  Business Segments Consumer Products- Domestic & International Hair care, Healthy Oils & Foods, Fabric Care Skin Care Services Global Ayurvedics Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook Indian Hair Care Market:  Indian Hair Care Market India’s share in World Population - 16% India’s share in World Hair - 28% Average length of hair in India ~ twice that of world average Hair Care Market Categories:  Hair Care Market Categories Wash Pre / Post Wash 70% 30% Rs.2400 Cr Rs. 1100 Cr. Coconut Oils Rs. 1500 Cr. 50% unbranded Hair Oils ~ Rs. 800Cr. Others : Conditioners, gel, creams, anti-lice,etc. ~ Rs. 100 Cr. Shampoo Rs. 1100 Cr. Marico Brands:  Marico Brands Turnover Rs. 4 billion ~ 25% of Branded Pre / Post Wash Market Hair Oil - Unique Market:  Hair Oil - Unique Market Large size segment Presence of many sub segments Coconut Oil, Amla, Cooling Oil, Value Added Coconut Oils, Non-sticky hair oils, problem solution oils, Mustard, etc. Small share of households’ monthly outlay Deep rooted habit, high loyalty Weak MNC presence Hair Oil - Marico Strategies:  Hair Oil - Marico Strategies Present in all segments with products straddling across price points Grow market - conversion of loose oil customers in categories with dominant presence Slide24:  Coconut Oil Market Large Market - 50% unbranded ~ Rs. 8 Billion Parachute as a brand was not seen as modern brand A discontinuous approach in this area would mean Tapping “A Big Opportunity” In terms of form: Sleeker Pack; Pearlised Look to appeal to the young audience In terms of image: Modern brand New Ad Campaign - Young, Vibrant:  In terms of form: Sleeker Pack; Pearlised Look to appeal to the young audience In terms of image: Modern brand New Ad Campaign - Young, Vibrant Relaunched Relaunch Results:  Relaunch Results Significant 4% + Increase in Market Share To update Parachute Franchise - PCNO Overview:  Parachute Franchise - PCNO Overview Slide28:  Small Pack strategy Convert loose oil consumers To packaged Parachute Coconut Oil Parachute Mini Pack Re. 1 Pack - Value for Money - Convenience Now contributes about 3% of Parachute Volumes Volume growth of 55 %;outlet growth of 100% Mini Pack Blister: Impact on Franchise:  Blister: Impact on Franchise Parachute excluding Mini 2800 3 Cr. Parachute Mini 100 2 Cr. Way Forward:  Way Forward Expand Category Propagate criticality of oiling Launch low price point packs aimed at loose oil conversion Rs 5 pack added to the portfolio PR and surround activities Extend Parachute Brand to other value added oils Slide31:  Background Acquired from P&G in 1999, volumes stagnating Market Opportunity Lice incidence level in the country among school going girls at 60%+ Branded lice solutions current usage at 10%+ Shampoo Penetration - Low Slide32:  Non Users of Mediker Anti-Lice Treatment Apply hair oil & then comb out lice with a lice comb Need for more acceptable product form that fits into existing habit/regime Birth of Mediker Anti-Lice Oil in FY03 An oil with natural ingredients Coconut oil with Neem and camphor Consumer Insight Slide33:  What has worked? New product delivery format Backed by clinical research and trials Advertising on two fronts Tactical - Announcer highlighting natural ingredients Theme communication with never before used insight Lice = “mother’s social embarrassment” Home to Home selling and detailing exercise Trial generation and Word Of Mouth Education on lice problems Slide34:  Results so far and plans Franchise Volumes Double in just one year Mediker Oil has tapped a new market No Cannibalization of Mediker shampoo Usage gone up from 10% levels to 20% now Future Create a Rs. 50 Crore brand in next 3 years Extend Mediker equity beyond anti-lice Other problem solution areas Hair oils:  No 2 position consolidated Parachute Jasmine: 34% growth in volumes Market share up to 28% Shanti Amla: Volume Growth of 9% Market Share up to 15% Fastest growing Hair Oil brand (Jan-Dec ORG) Outlets Reached: 5.8 Lac Hair & Care Volume Growth of 10% Hair oils Hair Care - Going Forward :  Hair Care - Going Forward Extend Presence to other segments Launch differentiated value added products Strengthen Youth connect burgeoning >25 segment in Top 10 cities understand hair care needs Launch relevant products Prototypes :  Prototypes New improved Hair & Care Silk and Shine Shanti Maha Thanda Edible Oil Market Categories:  Edible Oil Market Categories Premium Popular Safflower Soya Sunflower Mustard Blends Cotton Seed Value Rs.9.4 bn Rs.17.3 bn Market Growth 5% 29% Marico operates in the Premium segment Turnover ~ Rs. 2.5 billion Healthy Oils and Foods:  Healthy Oils and Foods Features Low margins in the popular segments Healthy Foods is a sunrise segment But low branded portion Growing at 15-20% Marico Strategies Invest in Top end - Healthy Oils Protect Margins Functional foods e.g. Soya Nuggets Slide40:  Saffola Franchise: Volume Growth of 3 % Higher growth in the high margin component Saffola campaign: New TV campaign helps volume growth Saffola Gold Prototype Saffola Healthy Foods - going Forward:  Healthy Foods - going Forward Consolidate Saffola Franchise Move the brand from therapeutic to preventive platform Continue to be the thought leader in the category Consolidate on Optimist & Enabler position Saffola Gold Prototype- scale up International Business:  International Business International Business:  International Business Parachute Hair Care Bangladesh Rs. 450 million Middle East Rs. 250 million Others Rs. 60 million Total Rs. 760 million 21 % growth 9% of Total Largest Indian FMCG company in Bangladesh Presence in 18 countries Profitable Business all over Global competitiveness of products Slide44:  Parachute in Bangladesh Offered Modern Plastic Packs as opposed to tin packs Wider choice for the consumer Parachute Tuni Parachute 50 and 100 ml Packs Investment in Sales and Distribution infrastructure Own field force Impactful Advertising - local language and local channels Investment in backroom Own manufacturing unit What did we do differently? Slide45:  Parachute in Bangladesh During the last 3 years The Market Share has almost doubled Dec-01 24% Dec-02 36% Dec-03 43% Consolidates No. 1 position Results so far Bangladesh Potential:  Bangladesh Potential Category Size Growth Marico’s MS KL Rate % CNO Total 36000 2% 10% Hair Oils 1800 2% 15% Slide47:  Parachute in Bangladesh Achieve deeper market penetration - grow distribution Convert loose oil users to Parachute users Continue Market Share growth from competition Extend Parachute Umbrella to other hair care products Parachute Herbal - a value added Coconut Oil - launched in FY04 Enter other hair care segments - Shampoos Future Plans Slide48:  Hair Care market in the Gulf Market Size Marico’s In Rs. Million Market Shares Coconut Oils 300 35% Hair Oils 500 11% Hair Cream 900 9% Slide49:  Hair Cream Market in the Gulf Opportunity A Big growing Market ~ Rs. 50 Crore + Market dominated by MNC’s - Brylcreem & Sunsilk Parachute Cream We launched Parachute Hair Cream in 2001 A product specifically customised for Arabs Leveraged Parachute Equity Goodness of Coconut without coconut fragrance to cater to tastes of Arabs Results so far Marico commands a 9% market share - Growing year after year International Business:  International Business Marico Strategies Cater to typical Indian demands Coconut Oils, Hair Oils - leverage Parachute equity Customise products for local needs Hair Creams and mild perfumed hair oils for the Gulf Enter new geographies Pakistan - a Big Opportunity Kaya Skin Clinic The Science of Skin :  Kaya Skin Clinic The Science of Skin A pioneering opportunity :  A pioneering opportunity Hair Care Heart Care Skin Care What is the consumer need?:  What is the consumer need? The modern consumer is looking for options to enhance his or her appearance - a self esteem enhancer Skin needs continuous rejuvenation due to pollution, environmental factors and stressful lifestyle. Healthy skin is becoming a high priority area for today’s consumer What is the Kaya concept?:  What is the Kaya concept? Provide safe, effective, result oriented cosmetic dermatology procedures US FDA approved world class technology in a spa like ambience All treatments Non-invasive Specially customised for Indian skin types Highly trained skin practitioners Personalised & customised to your skin’s needs Who is the Target Audience?:  Who is the Target Audience? Men & Women Age group: 16 to 60 years SEC A 1 & A 2 Across metros and minimetros in India What are the Skinservices?:  What are the Skinservices? Normal Skin Permanent Hair Reduction Kaya Glow Skin Polishing Glycolic Peels Problem Skin Pigmentation & Scar Reduction Acne Wart Removal Psoriasis Beautiful glowing skin Visible Results Ageing Skin Non-Surgical Face Lift Photo Facials Botox Restyalane Forever young What are our differentiators?:  What are our differentiators? Efficacy Experience Safety Efficacy:  Efficacy All clients meet with the dermatologist who prescribes a personalised, skin care programme for them to ensure effective results and address specific concerns. Each of the services by skilled skinpractioners are delivered using best in class technology. A home care regime of effective products are also recommended. A series of gentle procedures spaced appropriately which target specific concerns (aging, acne, unwanted hair, pigmentation, fatigued skin, environmental effects) Experience:  Experience The zen like ambience The Kaya drink concocted by Karen Anand The skinpractioner’s uniforms designed by Bhairavi Jaikishen The personalised attention by dermatologist, clinic manager and skinpractioner. The private spacious rooms for each procedures Safety:  Safety Choosing appropriate technology for Indian skin Training process for skinpractioners All services supervised by qualified dermatologists Checking medical history of clients to rule out any contraindications What are our clients saying ?:  What are our clients saying ? “Just what Mumbai needed: a good clinic for completely professional treatments.” “10,000 times better than anything in LA.” “A very refreshing experience from start to finish. Feels good just being here.” “A must for all women” “Beautiful ambience” “Feel young! feel reassured! Feel optimistic!” What has been the progress?:  What has been the progress? 13 Clinics operational as on date : 7 - Mumbai (Bandra, Juhu, Kalaghoda, Napen Sea Road, Mulund , Worli & Lokhandwala ) 4 - Delhi (GK II , Punjabi Bagh , Safdarjung , Noida) 2 - Dubai ( Jumeirah, Karama) How are we doing ?:  How are we doing ? Total Client base of 10000 + All Clinics are meeting Marico action standards Most of the clinics achieving break-even Service Quality Customer feedback Scores in all clinics at Excellent Level - Score above 4 out of 5 What is the way forward ?:  What is the way forward ? Saturation Strategy in Mumbai & Delhi markets Expand to other regions : Over 50 clinics in next 2 years Establish Middle East business model Expand range to products Establish Kaya as the most effective & trusted skin care destination Sundari :  Sundari About Sundari (a beautiful woman):  About Sundari (a beautiful woman) ~ 20 skin care products based on philosophy of Ayurveda Moisturizers, Cleansers, Nighttime treatments, Eye treatments, Other specialty products Distribution through Spas, Internet, Departmental Stores, International Distributors The Sundari Skin Care opportunity Ready business in the US 5 years of spade work Accelerates Marico’s learning curve range of quality products, packaging a new product development pipeline established back room acceptance by beauty press, PR coverage Slide67:  Pre-acquisition status Small company with turnover of $1 million Dependent on a single channel Low focus on cost management Slide68:  Current Status and Growth strategies Business growing in the Spa & Internet channels Portfolio being expanded Integration with Marico Culture Performance management system Product development and trials Web-site marketing and sourcing Leverage international distribution network Focus on cost management Slide69:  Spa Channel Spa business in US growing fast Revenues doubled bet 1991($5 bn) to 2001( $10.7bn) Spa outlets increased - 5,300 in 1999 to 9,632 in 2001 Size of products sales through Spas - 1- 1.5 bn $ Entry barriers for selling through Spas high Differentiator - Training to Spa personnel on new services Spas value training provided by Sundari appreciate learning something new Slide70:  Dual source of income Retail sales (80%) Sales to Spas ( 20 %) Fixed costs high - primarily manpower Longer gestation for channel Though lower than retail Now contributes 44 % of Sales Spa channel Slide71:  Internet - A big opportunity in US Internet is a focus areas for Sundari Revenue has built up consistently Revenues doubled between Q1 and Q4 Share of total sales increased to 26 % from around 20 % Helped by new product introductions and PR Promotions around special days Internet channel Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook Journey over the past few years…...:  Journey over the past few years…... Greater Resilience to competition Higher Quality Earnings Dependence on Parachute reduced Brand Equity- Pricing Power goes up New product successes Consistency of earnings Aggressive Distribution Policies Improving Liquidity in scrip Slide74:  Resilience to Competition Marico’s frontline brands - Parachute, Saffola & Sweekar have shown remarkable resilience against competition Brand Category Market Share (%) 2000 2004 Parachute, OOM CNO 53-54 56-57 Saffola, Sweekar ROCP 13-14 15-16 Parachute Jasmine, Shanti, Hair & Care Hair Oils 7-8 16-18 Slide75:  Unique Placement vis-a-vis Competition Products largely Indian in nature not in MNC parent focus not caught in crossfire of an MNC battle Continuous Innovation Packaging Upgradation Contribution from small packs is high limited scope for undercutting Best Cost structure in the Industry Dependence on Parachute:  Dependence on Parachute Share of Parachute brought down In Turnover from 70% to 40% New Products have helped with continued growth Five Back to Back Success stories Saffola Tasty Blend, Parachute Jasmine, Shanti Amla, Saffola Nutri Blend and Mediker Anti-Lice Oil Slide77:  Brand Equity- Pricing Power Fairly resilient to commodity price fluctuations Margins commanded per unit of volume No speculative position taking Market leadership protects contribution No.1 sets the price tone Pricing Power protects Margins Slide78:  New Products/Businesses New Products / Businesses contribute 18% to Turnover Uncommon Consistency ! :  Uncommon Consistency ! Growth 14 Consecutive Quarters of YOY Sales Growth 18 Consecutive Quarters of YOY Profit Growth Net Profit CAGR past 4 years 16 % Payout ~ 50% 13 Consecutive Quarters of distribution Consistently high return on capital:  Consistently high return on capital Better capital usage despite investment at CAGR 25 %+ ROCE > 30% for past 43 Quarters Economic Value Added EVA Growth even after including new businesses Growth for past 6 years in a row Distribution Policies:  Distribution Policies Increasing Payout ~ 50% Regular Distribution reflecting the confidence Innovative options Used to Increase Liquidity Liquidity in the Scrip:  Liquidity in the Scrip Dispersal of free float Share holder base doubles - ~ 5000 to~11000 Volume per day ~ 65000 in Q4 Vs 10000 in Fy03 Trades per day (BSE + NSE) 469 in FY04 Vs 135 last year Will keep exploring new measures What Next… ?:  What Next… ? Size of the Company - Mid Cap Targeting Rs.1000 cr next year Liquidity in the Scrip Improving - has grown 6 times in 4 Quarters Large non-promoter holdings Top 2 used to hold 16 % Now down to 11% Comparative Market Valuations:  Comparative Market Valuations Marico Other FMCG Average Price to Earnings 13.0 ~ 21 Price to Book Value 4.0 ~ 11 Price to Sales 0.8 ~ 3 Overview:  Overview Financial Recap Business Model Segmental Highlights & Strategies Shareholder Value Issues Outlook FMCG Industry:  FMCG Industry Marico outside price war zone Major Players focussed on other categories Slide87:  Near Term Growth Strategies Constant realignment of Portfolio along higher margin lines Focus on - Volume Growth Consolidation of Market shares Strengthening Flagship brands Grow New Products-Existing launches & Prototypes aim for 2-3 new product launches in FY05 Slide88:  Near Term Growth Strategies Sustained growth in International Business add new countries - Pakistan Nurturing of new businesses expand Kaya business de-risked focussed growth in Sundari Growth Philosophy:  Growth Philosophy Commodity conversion Technology Low Value Add High Value Add Hair oils Personal Care (Hair + Skin) Edible oils Healthy Oils and Foods Local Global More enduring Competitive Advantage Leading to Enhanced and Durable Stakeholder Value Slide90:  Thank You

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