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Informist, Monday, Feb. 10, 2025

 

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--Varun Beverages Oct-Dec consol net profit INR 1.85 bln 
--Analysts saw Varun Beverages Oct-Dec consol net profit INR 1.82 bln 
--Varun Beverages Oct-Dec consol PAT INR 1.85 bln vs INR 1.32 bln year ago 
--Varun Beverages Oct-Dec consol revenue INR 38.18 bln vs INR 27.31 bln 
--Varun Beverages to pay INR 0.50 per share final dividend 
--Varun Beverages 2024 consol PAT INR 25.95 bln vs INR 20.56 bln year ago 
--Varun Beverages 2024 consol revenue INR 204.81 bln vs INR 163.21 bln
--Varun Beverages Oct-Dec consol EBITDA INR 5.80 bln, up 38.7% on year 
--Varun Beverages Oct-Dec consol sales volume 215.10 mln cases, up 38.1% on year 
--Varun Beverages 2024 consol sales volume 1.12 bln cases, up 23.2% on year 
--Varun Beverages 2024 India organic volume up 11.4% YoY; intl volume up 6% 
--Varun Beverages 2024 net realisation INR 177.90 per case, up 1.3% on year 
--Varun Beverages 2024 gross margin 55.5%, up 165 bps on year 
--Varun Beverages: Co has become net debt free Oct-Dec by using QIP proceeds 
--Varun Beverages: Expect to spend INR 31 bln on capex in 2025 

 

By Anand JC
 

MUMBAI – Varun Beverages Ltd.'s earnings for the December quarter managed not only to beat analyst estimates, but came at multi-quarter highs on the back of its acquisition drive in Africa. The company's consolidated revenue posted the strongest on-year growth since the June quarter of 2022, while its net profit growth was the quickest since the December quarter of 2023.

 

The PepsiCo franchisee's consolidated profit after tax for Oct-Dec was INR 1.85 billion, just over 40% higher compared to the same period a year ago. A consensus estimate of 10 brokerage firms' views had forecast a bottom line of INR 1.82 billion.

 

Its consolidated revenue from operations for the reporting quarter was INR 38.18 billion, 40% higher on year but 23% lower sequentially. Analysts had forecast a revenue of INR 35.83 billion for the period. 

 

Varun Beverages' total expenses for the December quarter was INR 36.07 billion, over 40% higher on year, on account of a rise in raw material costs, excise duties paid, staff costs, finance costs, and depreciation expenses.

 

EXPENSES PORTFOLIO

Depreciation and amortisation expenses increased 57% on year to INR 2.61 billion for the reporting quarter. Cost of materials consumed, which constitutes roughly half of Varun Beverages' total expenses, increased over 40% on year to INR 17.06 billion. Employee benefits expense grew nearly 30% on year to INR 4.79 billion, while other expenses expanded 40% to INR 10.10 billion. Excise duty paid by Varun Beverages for the December quarter doubled on year to INR 1.29 billion. 

 

Varun Beverages' depreciation and finance expenses shot up in 2024 by 39% and 68%, respectively, because of its acquisition of BevCo in South Africa, coupled with the establishment of its four new production facilities in India and Democratic Republic of Congo. The company's financial year is the same as the calendar year, which runs from Jan. 1 to Dec. 31.

 

The company, which currently handles over 90% of PepsiCo's India sales volume, incurred a tax expense of INR 5.85 billion for the December quarter, over 30% higher than the corresponding period a year-ago. 

 

The bottler's earnings before interest, taxes, depreciation, and amortisation, or EBITDA, for the December quarter was INR 5.80 million, nearly 39% higher than the base quarter. Analysts had expected an EBITDA of INR 5.77 billion.

 

The gross margin of Varun Beverages for 2024 grew 165 basis points from the base quarter to 55.5%. The company said this expansion was on account of its strategic procurement and storage of polyester chips to avail price benefits, along with efforts to reduce sugar content and benefit of increasing backward integration.

 

For 2024, Varun Beverages' EBITDA grew 31% on year to INR 47.11 billion, aided by growth in its gross margin. Its EBITDA margin for 2024 was 23.5%, up 105 bps. "This net improvement in EBITDA margins is in-spite of consolidation of SA (South Africa) market with low margin due to ~80% mix of own brands and the fixed costs associated with new capex, which are yet to the utilized to full potential," Varun Beverages said in a presentation to investors.

 

VOLUMES

Varun Beverages sold 215 million cases in the December quarter, 38% higher than it did a year ago. This includes 43 million cases sold in South Africa and 7.8 million cases sold in Democratic Republic of Congo. Varun Beverages' India volumes grew 11.4% on year during the December quarter, while its consolidated volumes increased 23.2%, largely led by new territories. Varun Beverages' net realisation per case increased to INR 177.9 in 2024, up 1.3% on year.

 

In 2024, its consolidated sales volume grew 23.2% on year to 1.12 billion cases. Its organic volume growth in India for calendar year 2024 was 11.4%, and in international territories it was 6.3%. The company blamed the restricted international organic growth due to its transition to zero sugar portfolio in Zimbabwe after the country introduced a sugar tax in February last year.

 

Its sales volumes in South Africa, where it operated for the first time in 2024, was 12.5%. "We are consciously reducing our reliance on modern trade channel and enhancing our distribution network in general trade. As an enabler, we have placed more visi-coolers in the SA market in a single year than what was cumulatively placed till date by previous operators. We are working on plans for backward integration in the territory," Ravi Jaipuria, chairman of Varun Beverages, said in an investor presentation.

 

The company also raised INR 75 billion through a qualified institutional placement in Oct-Dec, which it intended to use primarily towards repayment of debt and towards acquisitions. As such, it became net debt free in the December quarter. "This action has helped in strengthening the company's balance sheet to create a war chest for future growth to enhance value for stakeholders," the company said. 

 

For 2024, Varun Beverages' consolidated net profit was INR 25.95 billion, 26% higher than the previous year. Its revenue from operations last year was INR 204.81 billion, just over 25% higher than its sales in 2023. 

 

The company capitalised net assets worth INR 45 billion in 2024. It has guided for a capital expenditure of INR 31 billion for 2025. Of this amount, as of Dec. 31, the capital work-in-progress and capital advances stood at INR 16.5 billion. The company intends to use this capital expenditure allocation towards setting up greenfield facilities in India, at INR 20 billion. The rest would be used for expansion of snacks manufacturing in international territories and recycled polyethylene terephthalate facilities in India, brownfield expansion in Sri City, Andhra Pradesh, and for expansion in Democratic Republic of Congo as well.

 

Varun Beverages' working capital days were reduced to 31 days as on Dec. 31, 2024 from 34 days in the previous year. Its production capacity in India in 2024 increased around 45% from the previous year. 

 

The company's board recommended paying an interim dividend of INR 0.50 per equity share. The record date is yet to be fixed.

 

At 1317 IST, Varun Beverages' shares traded at 540.80 on the National Stock Exchange, down 2.3% from previous close.    End

 

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

 

Edited by Tanima Banerjee

 

 

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