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Informist, Tuesday, Oct. 22, 2024

 

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--Varun Beverages: Will expand Congo facility, start second unit by 2025
--Varun Beverages: Congo facility commissioned, ramped up to 100% output
--Varun Beverages:49% of Jan-Sept consol sales volume from low/no sugar pdts
--Varun Beverages: Gross margins up 22 bps to 55.5% in Jul-Sept
--Varun Beverages: International Jul-Sept volumes organically up 7.9%
--Varun Beverages: India Jul-Sept volumes up only 5.7% on heavy rains
--Varun Beverages Jul-Sept consol EBITDA margin 24%, up 117 bps on year
--Varun Beverages Jul-Sept consol sales volume 267.5 mln cases, up 21.9% YoY
--Varun Beverages Jul-Sept consol EBITDA INR 11.51 bln, up 30.5% on year
--Varun Beverages Jan-Sept consol revenue INR 166.64 bln vs INR 135.90 bln
--Varun Beverages Jan-Sept consol net profit INR 24.09 bln vs INR 19.24 bln
--Varun Beverages Jul-Sept consol revenue INR 49.32 bln vs INR 39.38 bln
--Varun Beverages Jul-Sept consol PAT INR 6.20 bln vs INR 5.01 bln year ago
--Analysts saw Varun Beverages Jul-Sept consol net profit INR 5.88 bln
--Varun Beverages Jul-Sept consol net profit INR 6.20 bln
 

 

By Avishek Rakshit

 

KOLKATA – A high volume growth, especially in its core global markets, led soft-drinks major Varun Beverages Ltd. to report a consolidated net profit of INR 6.2 billion for the September quarter, up 23.7% on year, beating the Steet's expectations.

 

The company, which is the franchisee for Pepsico Inc.'s products in India and parts of Africa, posted a 25.2% on-year growth in its consolidated revenue at INR 49.3 billion, which also surpassed the Street's estimates. The growth was on account of higher sales volume. Also, the net revenue realisation per case increased by 1.9% on year to INR 179.6. Brokerages had projected Varun Beverage to report a net profit of INR 5.9 billion on revenues of INR 47.3 billion.

 

The company’s sales volume in Jul-Sept grew by 21.9% on year to 267.5 million cases from 219.5 million cases in the year-ago period. This surpassed the expectations of some brokerages which estimated sales volume at 264 million cases.

 

Carbonated soft drinks, as usual, accounted for 75% of the revenue, followed by packaged drinking water at 21%, and juices at 4%.

 

In a statement, the company said that heavy rains throughout India led to volumes growing by 5.7% on year. The volume growth of 7.9% in the overseas markets, however, surpassed the domestic growth. Its non-carbonated beverage portfolio in India, which consists of juice-based drinks, value-added dairy beverages and sports drinks, grew by 23.9% on year during Jan-Sept. Varun Beverages follows the Jan-Dec period as its financial year.

 

In the statement, Ravi Jaipuria, chairman at Varun Beverages, said that expansion of the distribution network, increased product penetration, and favourable demand trends in key markets aided the growth. "Overall, our focus remains on sustaining healthy growth in both Indian and international markets. The Indian market, with its growing consumption class and evolving consumer preferences, continues to offer immense opportunities," Jaipuria commented on the future outlook for the company's domestic business.

 

Its earnings before interest, tax, depreciation, and amortisation increased by 30.5% on year to INR 11.5 billion, which marginally surpassed the Street’s projections of nearly INR 11 billion. Operational efficiencies led to the EBITDA margin improving by 117 basis points on year to 24.0%.

 

Higher sales and operational efficiencies led gross margins to increase by 22 basis points on year to 55.5% during Jul-Sept compared with 55.3% a year ago, the company said in the statement. This came in sharp contrast to the projections of some brokerages, including Nuvama Wealth Management, which projected the overall gross margins to decline by 121 basis points to 45.9%.

 

Varun Beverages has been capitalising on the rising health consciousness among consumers, who seem to prefer more low-sugar or sugar-free products, which are often high margin products. In Jan-Sept, 49% of the company's consolidated sales volumes came in from such low-sugar and sugar-free products.

 

The profit growth has come despite the company's total costs shooting up sharply by 26.4% on year, to INR 41.6 billion. The company’s depreciation costs, too, increased by 50.2% on year during Jul-Sept, to INR 2.6 billion, following the acquisition of BevCo in South Africa in March and setting up of new production facilities in India and Congo. These greenfield projects also led to finance costs shooting up by 89.7% on year, at INR 1.2 billion. Employee benefit expenses also shot up by 38.1% on year, at INR 5.1 billion, and raw material costs went up by 9.2% on year at INR 17.9 billion.

 

"On the operational front, we are excited to share the successful commissioning of our greenfield facility in the Democratic Republic of Congo. In response to strong demand and our limited presence in the region, we have swiftly ramped up the facility to 100% utilisation on a three shift basis,” Jaipuria said. "This performance has encouraged us to move forward with expansion plans including backward integration and a second facility, expected to commence operations in the next calendar year.”

 

Varun Beverages is also on track to commission its new facilities across India before the summer of 2025, Jaipuria said.

 

During Jan-Sept, Varun Beverages reported a consolidated net profit of INR 24.1 billion, up 25.2% on revenues of INR 166.64 billion, up 22.6%.

 

At 1307 IST, shares of Varun Beverages traded 1.7% up at INR 588.8 on the National Stock Exchange. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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