Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Britannia Industries Ltd (BOM:500825, Financial) reported a 4% growth in revenue from operations, reaching INR4,130 crores.
- Operating profit grew by 10% on a 12-month basis and 51% on a 24-month basis, indicating strong profitability.
- The company has seen a resurgence in rural growth, driven by better monsoons, moderate inflation, and high rural employment.
- Britannia's market share continues to grow, with significant gains in both urban and rural markets.
- Investments in e-commerce and digital marketing have shown promising results, with e-commerce now contributing 4% of total sales.
Negative Points
- Commodity costs, including flour, sugar, and cocoa, are rising, which may impact future profitability.
- The company's performance in focus markets, particularly the Hindi belt, has been average and below expectations.
- Despite investments, the dairy business remains small, with cheese and drinks contributing only INR460-470 crores out of a total INR700 crores.
- The company's margins have decreased to 18.2% from 19% in previous quarters, partly due to increased ad spends.
- There is significant competition from regional players in the biscuit market, which could impact market share and growth.
Q & A Highlights
Highlights of Britannia Industries Ltd (BOM:500825) Q1 FY25 Earnings Call
Q: Congrats on the volume growth. My first question is on the cheese business. Do you need to work further on the pricing aspect? Where are we in terms of that? Also, would you have a market share in cheese?
A: We've taken a few actions on pricing, and our premium is slightly lower now. We are working on further possibilities to become more competitive. Our market share in cheese is small; we are number 2 in the industry but significantly behind the market leader, Amul. There's a lot of potential in the cheese market with our new innovations and efficiencies.
Q: On the demand side, did the hot beverages consumption decline impact biscuit sales? Was there any impact on INR5 or INR10 packs due to reduced out-of-home travel?
A: Hot beverages consumption is a good point to evaluate. Out-of-home travel did not negatively impact us significantly. Election rallies do not have a major impact on our sales. B2B demand for non-biscuits is progressing well.
Q: With the marginal inflation in commodity costs, how do you see FY25 pricing growth?
A: We might need to take some pricing actions, but it will not be as significant as in the past. We expect inflation to be around 4-5%, and we will evaluate which brands and categories require pricing adjustments.
Q: On the adjacent businesses, can you share where we stand at the EBITDA margin level now?
A: We do not consolidate separately for adjacency businesses, but overall margins are reasonable. Cake and Rusk are in double-digit margins, and bread is nearing double-digit margins. Croissant has high gross margins, and dairy is in investment mode.
Q: The deflation in pricing this quarter seems more than last quarter. Do you see any incremental changes going ahead?
A: There is no deflation; we have taken price rollbacks. We expect 4-5% inflation in the coming months and may take slight price increases if required. Volume growths are now close to double digits.
Q: Recently, I saw your back snacks extruded Time Pass in a shop in Bombay. Is this something recent?
A: This is still in the experimental stage. We are doing market tests to figure out what works. We are cautious and want to ensure success before a full rollout.
Q: On margins, we have been clocking margins of about 19% plus. This quarter, we are at 18.2%. What is the margin target going forward?
A: The focus is on driving top line growth. We aim to maintain margins but prioritize top line growth. We will do what is necessary to achieve both.
Q: On the pickup in volumes, is there any element of higher-than-usual in-home consumption due to the heatwave?
A: Achieving high single-digit volume growths in India should not be an issue. The objective is to continue seeing volume growths, and we will take necessary actions to achieve that.
Q: On other expenses, it seems costs have gone up. Is this due to higher ad spends?
A: Yes, ad spends were higher this quarter, but it will even out as we go forward. We achieved good volume growths with these spends.
Q: On focus markets, how much gap is there between you and the number 1 player in terms of market share now versus three years back?
A: The gap is still significant. We are gaining about one share point a year. Our focus markets contribute about 15% to our business, while the industry contribution is about 35%. We have a lot of ground to cover.
Q: On dairy investments, what is the contribution of dairy to your revenue?
A: Our dairy business will be over INR700 crores, with cheese and drinks contributing about INR460 crores. Drinks will end at over INR200 crores, and cheese will be about INR250 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
