Gutkha ban spells windfall for Emami

Thanks to the ban on paan masala and gutkha in many states, FMCG player Emami has now started enjoying lower menthol prices!

Price of menthol, which accounts for 20% of its raw material costs, has started easing with signs of dropping further as the usage of the throat cooling oil has reduced in chewing tobacco products.

Also, cultivation of mint leaves from which the oil is extracted has grown, officials of Emami told analysts during a conference call.

But Emami is still carrying some high cost menthol inventory and the benefit of lower prices would start accruing only from the first quarter of 2013-14, director Mohan Goenka said.

“Menthol prices have definitely moderated and we are getting it at `1,550-1,600 a tonne. Prices have moderated because the acreages of mentha have grown by as much as 50% and also because of the ban on paan masala and gutkha in lot of states and our senses is that prices will stay at these levels,” he said.

The average menthol prices during the second quarter were high at `1,900 a tonne.
Goenka expects them to ease to `1,400 level.

But we have stocks till March at a higher price. We see further scope of moderation but even if prices remain at these levels we are happy, so we will start building up (stock) now,” he said.
Emami, however, may still continue to raise prices of select products due to inflationary pressure on other input costs.

“We have already taken some price increases for the summer brands, but we are very clear that at least 4% price increase, which is to do with inflation, is inevitable,” he said.  Emami has aggressive plans for the healthcare products division comprising OTC, ethical and generic in the near future, he said.

During the December quarter, it reported a 21% year-on-year growth in turnover as well as profit  at `549 crore and `115 crore, respectively.

The growth was led by Boroplus Antiseptic cream aided by good winter season. Other major brands like Navratna, Zandu and Fair & Handsome also showed good growth.