Release Date: November 12, 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 volume growth of 8% for the quarter, indicating strong demand for its products.
- The company has successfully expanded its direct reach to 28.5 lakh outlets and increased its rural distribution network to over 30,000 distributors.
- Innovations such as Milk Bikis and wafer roll formats in Tamil Nadu have been well-received, contributing to the company's growth.
- Britannia's adjacent businesses, including wafers, rusk, and croissants, have shown positive momentum despite the challenging market environment.
- The company is leveraging digital adoption for enhanced efficiencies across sales, marketing, and supply chain, which is expected to drive future growth.
Negative Points
- Britannia Industries Ltd (BOM:500825) is facing a tough demand environment, particularly in urban and metro areas, due to high inflation and increased housing costs.
- The company reported a decline in operating profits by 12% on a 12-month basis, reflecting the impact of rising commodity costs.
- Inflation in key raw materials such as palm oil, flour, and cocoa is putting pressure on the company's margins.
- The company's profit after tax decreased by 9.6%, indicating challenges in maintaining profitability amidst rising costs.
- Competitive intensity in the market remains high, with some players engaging in aggressive pricing strategies, which could impact Britannia's market share.
Q & A Highlights
Q: How do you see the outlook for volume growth given the high base and inflation in raw materials?
A: Varun Berry, Executive Vice Chairman and Managing Director, stated that the company aims to balance pricing and volume growth. While there may be some short-term impact on volumes due to inflation, the focus is on maintaining a robust long-term business. The company will be cautious with pricing strategies over the next six to nine months.
Q: Can you provide insights into the cost and profitability outlook given the current raw material inflation?
A: Varun Berry mentioned that inflation is high, particularly in palm oil due to import duties. The company expects wheat prices to stabilize with better crops next year. Despite current challenges, Britannia aims to maintain its profitability within its quartile range.
Q: What is the status and expected impact of the Route to Market (RTM) 2.0 initiative?
A: Varun Berry explained that RTM 2.0 focuses on optimizing distribution by prioritizing high-potential outlets. The initiative is expected to take 12 to 15 months to fully integrate and aims to enhance sales efficiency and depth in urban markets.
Q: How is Britannia addressing the competitive landscape and pricing actions?
A: Varun Berry indicated that a 4% to 5% price increase is planned over the next two quarters, focusing on strategic SKUs. The company is monitoring competitive pricing closely to maintain market share while sustaining profits.
Q: What is the contribution of innovation and new product launches to overall revenue?
A: Varun Berry noted that products launched in the last 24 months contribute about 2% to revenue. While some innovations perform well, the company continues to evaluate and sustain successful products in the long term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
