More Stories

Informist, Monday, Nov. 11, 2024

 

Please click here to read all liners published on this story

--Britannia Jul-Sept consol net profit INR 5.31 bln vs INR 5.88 bln year ago 
--Analysts saw Britannia Jul-Sept consol net profit INR 6.32 bln 
--Britannia Jul-Sept consol revenue INR 46.68 bln vs INR 44.33 bln year ago 
--Britannia Apr-Sept consol net profit INR 10.37 bln vs INR 10.45 bln year ago 
--Britannia Apr-Sept consol revenue INR 89.18 bln vs INR 84.44 bln year ago
 

 

By Avishek Rakshit

 

KOLKATA – Mounting production costs, primarily due to rise in prices of raw materials and wages, led Britannia Industries Ltd. to not only miss the Street's projections for Jul-Sept, but also report a fall in its net profit. Tepid consumer demand added to the company's woes, which slowed down the pace of revenue growth.

 

Britannia reported a 9.6% on year fall in net profit to INR 5.3 billion against the Street's projections of INR 6.3 billion. The revenue, at INR 46.7 billion, also missed the Street's projections of INR 47.6 billion, although it grew 5.3% on year. This is despite the company's sales volume increasing by 8% on year during the period under review.

 

Britannia's net profit in the year-ago quarter was INR 5.9 billion and that in Apr-Jun was INR 5.1 billion. Revenue in the year ago period was INR 44.3 billion and that in Apr-Jun was INR 42.5 billion.

 

However, the company maintained that its performance was reasonable despite a fall in consolidated profit. "A 8% volume growth with a sequential increase in revenue and operating profits are satisfactory results in the face of severe commodity inflation leading to a tepid consumer demand scenario in most FMCG categories," Varun Berry, vice chairman and managing director of Britannia, said in a statement issued by the company. 

 

Motilal Oswal Financial Services, Kotak Institutional Equities, and Nuvama Wealth Management had projected the volume growth in excess of 8%. Nevertheless, since the revenue growth trailed the volume growth, a sector analyst with a domestic brokerage said that the volume growth could be due to the company's decision to offer more grammage to consumers at same price points to gain market share. 

 

In the statement, Britannia said that it increased prices selectively for some of its products but relied more on cost optimisation to check the imbalance between volume and value growth in face of commodity inflation.

 

The largest cost overhead for the company – raw materials – increased by 12.9% on year to INR 25.8 billion, and employee benefit expenses surged by 45.3% on year to INR 2.3 billion. This was despite the company shutting down one of its oldest plants in the country and offering some of its employees a one-time voluntary retirement scheme, costing Britannia INR 185.1 million in the June quarter.

 

"In the context of steep rise in prices of key commodities such as wheat, palm (oil), cocoa etc, we demonstrated agility in initiating focused pricing actions and identifying new levers for cost optimization across the value-chain. As a result, we maintained a healthy operating margin of 15.5% during the quarter," Berry said.

 

Finance costs declined by 35.2% on year to INR 346.4 million, but depreciation and amortisation costs increased by 6.1% on year to 9.2 INR billion. Effectively, total costs rose by 8.4% to INR 39.9 billion outpacing the revenue growth.

 

Britannia said it will keep investing in increasing its capability and brand development with the clear objective of driving market share and sustaining profits. "Our agenda of being a 'Total Global Foods Company' is progressing well with our adjacent businesses such as croissant, milk shakes, wafers and international (business) growing at a healthy pace. Making strides in this direction, we are working on redefining our distribution strategy to optimize range distribution and improve outlet servicing, and the preliminary results of the pilots across 25 cities covering more than 50,000 outlets are encouraging," Berry concluded. 

 

For the Apr-Sept period, Britannia reported a net profit of INR 10.4 billion, down 0.8% from the year ago period. Revenue for the six-month period was INR 89.2 billion, up 5.6% on year. On Monday, shares of Britannia closed lower by 5.4% at INR 5,434.65 on the National Stock Exchange.  End

 

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.