Biscuits maker Britannia Industries Ltd reported a 37% drop in standalone operating profit and net profit as higher prices of commodities like sugar, wheat and milk have led to higher costs. Edible oil prices, which were ruling softer compared to a year ago period, too are seeing an increase. Inflation seems to have hit demand for its products too, as overall revenues (including other operating income) grew by just 8% during the quarter. But BIL seems to have held on to prices, focusing on volume growth rather than hiking prices to maintain margins and risking a decline in demand.
Highlights
- Net sales grew by 7.7% to Rs 881 crore and other operating income rose from Rs 1.65 crore to Rs 4.23 crore, during the December 2009 quarter compared to a year ago period. But growth is better in this quarter, as April-December 2009 quarter was up by only 5%.
- Raw material consumption increased by 10.2%, which is quite good considering that food inflation has been much higher, with wholesale prices of sugar and wheat increasing on an average by 50% and 30% from a year ago. Better procurement practices have allowed the company to keep its commodity prices lower. Within raw material consumption, traded goods purchased rose by 115% to Rs 89.6 crore. Conversion costs that are reported separately rose by 16% to Rs 76 crore. The company procures some of its products directly from third party producers. It also supplies raw materials and gets them processed through toll manufacturers, to whom it pays conversion charges. Higher conversion charges could reflect higher costs needing to be reimbursed or higher output.
- Competition in the packaged foods sector has been quite stiff and advertising rates too are rising. BIL’s advertising and promotion expenditure rose by 30% to Rs 71 crore.
- Profit before tax and after exceptional items rose by 42% to Rs 32 crore while post-tax net profit rose by 36.9% to Rs 29 crore.
- On a consolidated basis, its net sales during the nine months ended December 2009, its net sales rose by 7.5% to Rs 2736 crore and net profit rose by 12.7% to Rs 122 crore. But this year on year comparison is not comparable, as BIL acquired a 49% stake in its joint venture Britannia New Zealand Foods Pvt Ltd, taking its stake up to 100%. That will give it a full share in its profits compared to 51% earlier.
- The company’s share price is down by 3.3% at Rs 1600, compared to a week ago.