1.Britannia took price hike
2.palm oil price fell 50% from high in may-June
3. New products introduction
4. Every FMCG company given great result ITC NESTLE HUL
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One thing evident in this mega inflation enviornment is that urban/premium is doing much better than ruralโฆhence urban focussed FMCG faring betterโฆ Britannia seems to have a unique proposition here, their products are urban focussed but even in rural, plain biscuits can prove cost effective snacks/food . Similar thing was observed during lockdown etc. When biscuits everywhere in India seemed to substitute many food articles not readily availableโฆin both urban and ruralโฆ
Disc. Invested since longโฆNot added since long because not sure about corporate governance but business seems solid hence could not exit also. Views maybe biased. I can be wrong in all my assessments and not eligible for any recommendations
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This has been clarified by Management, that they borrowed 1000+ crore for Dairy unit capex, at a rate of 5.6%. And their treasury yields were much higher than this. This was put up in the latest tweet by Mangalam Maloo himself (author of the above original post)
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britannia and varun beverages leads the fmcg pack
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Britannia Q2FY24 Concall Summary
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- Britannia Industries Ltd reported a 40% decrease in its consolidated net profit for the quarter ended December 31, 2023.
- The net profit amounted to Rs 556 crore compared to Rs 932 crore in the same period last year.
- Analystsโ expectations were not met, with a poll of six brokerages predicting a net profit of Rs 566 crore.
- Sequentially, Britanniaโs profit slipped 5% from Rs 587 crore.
- Factors contributing to the muted growth include a high base effect, some price cuts, high competition, and low single-digit volume growth.
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Britannia Industries Limited: Financial Overview for FY 2023-2024
Key Financial Metrics
- Revenue: The total revenue for FY 2023-24 was โน16,186.08 crores, showing an increase from โน15,618.42 crores in FY 2022-23.
- Net Profit: The company reported a net profit of โน2,082.05 crores in FY 2023-24, compared to โน2,139.30 crores in the previous year.
- Earnings Per Share (EPS):
- Basic: โน22.01 for FY 2023-24 (FY 2022-23: โน23.17).
- Diluted: โน22.01 for FY 2023-24 (FY 2022-23: โน23.17).
Financial Position
- Total Assets: The companyโs assets stood at โน8,370.84 crores by the end of March 2024.
- Equity and Liabilities: Total equity was โน3,527.52 crores and total liabilities were โน4,843.32 crores as of March 2024.
Ratios
- Debt-Equity Ratio: 0.58 in FY 2023-24, which suggests a healthy balance between debt and equity financing.
- Net Profit Margin: 13.32% for FY 2023-24, indicating the percentage of revenue that constitutes the net income.
Dividend
- The Board recommended a final dividend of โน73.50 per equity share for FY 2023-24.
Auditorโs Opinion
- The financial statements received an unmodified opinion from the auditors, indicating that they present a true and fair view of the companyโs financial condition and operations in accordance with applicable accounting standards.
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Few of my takeaways from Q1 FY25 of Britannia Industries
๐๐จ๐ซ๐ฉ๐จ๐ซ๐๐ญ๐ ๐๐ซ๐๐ฃ๐๐๐ญ๐จ๐ซ๐ฒ:
- Revenue grew 4% year-over-year to INR 4,130 crores, with volume growth of 8%
- Operating profit increased 10% to INR 680 crores, with margins at 16.5%
- Rural markets showing signs of recovery, with rural growth outpacing urban
- Focus on driving topline growth even if it means slightly lower margins in the near-term
๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐ ๐๐ฅ๐ฎ๐๐ฉ๐ซ๐ข๐ง๐ญ:
- Continuing distribution expansion, especially in rural areas and Hindi belt states
- Implementing sales transformation project with Bain & Co to improve efficiency
- Investing in brand building and innovation, launching new products like Pure Magic Stars
- Scaling up adjacency businesses like dairy, with focus on cheese and beverages
- Expanding manufacturing footprint with new facilities coming up in UP and Bihar
๐๐๐ซ๐ค๐๐ญ ๐๐ฒ๐ง๐๐ฆ๐ข๐๐ฌ:
- Recovery in rural demand after prolonged slowdown
- Premiumization continuing across portfolio
- Focus on innovation and new product launches
- Expansion into adjacent categories like dairy and snacks
Industry Tailwinds:
- Improving rural sentiment and consumption
- Moderation in inflation compared to previous years
- Growing preference for packaged and branded food products
Industry Headwinds:
- Inflationary pressure on key commodities like flour, sugar, and cocoa
- Intense competition, especially from regional players
- Downtrading in certain markets to cheaper alternatives
๐๐ง๐ฏ๐๐ฌ๐ญ๐จ๐ซ/๐๐ง๐๐ฅ๐ฒ๐ฌ๐ญ ๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐ง๐ฌ:
- On slower pace of distribution expansion: Management emphasized weighted distribution growth and focus on extraction from high potential outlets
- On margin pressure: Company prioritizing topline growth over margin expansion in near-term
- On dairy business profitability: Gross margins in line with overall business, but depreciation impacting net profitability
Competitive Landscape:
- Continuing to gain market share, albeit slowly
- Large gap with market leader (50% share vs Britanniaโs 18%) provides headroom for growth
- Facing competition from both large national players and regional brands
๐ ๐ฎ๐ญ๐ฎ๐ซ๐ ๐๐ซ๐จ๐ฃ๐๐๐ญ๐ข๐จ๐ง๐ฌ:
- Targeting high single-digit to double-digit volume growth
- Expect 4-5% inflation in coming months, may take some pricing actions
- Focus on driving topline growth even at slightly lower margins
๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐๐ฉ๐ฅ๐จ๐ฒ๐ฆ๐๐ง๐ญ:
- Investing in manufacturing capacity expansion
- Continued investment in brand building and innovation
- Scaling up adjacency businesses like dairy
Opportunities & Risks:
Opportunities:
- Rural recovery and distribution expansion
- Growth in adjacency businesses like dairy and snacks
- Premiumization across portfolio
Risks:
- Commodity price inflation
- Intensifying competition
- Potential economic slowdown impacting discretionary spending
๐๐จ๐ง๐ฌ๐ฎ๐ฆ๐๐ซ ๐๐ฎ๐ฅ๐ฌ๐:
- Rural demand showing signs of improvement
- Some downtrading observed in certain markets
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