Release Date: February 07, 2025
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 6.5% growth in revenues over the past 12 months, indicating strong performance despite challenging conditions.
- The company has expanded its direct distribution network, increasing its reach from 27.9 lakh outlets to 28.8 lakh outlets, and rural distributors from 30,000 to 31,000.
- Innovative product launches, such as the Harry Potter-themed Pure Magic Choco frames and the INR5 pack of rusks, have been well-received, particularly in e-commerce and modern trade channels.
- The company's adjacency businesses, including croissants and milk shakes, are experiencing high double-digit growth, contributing to portfolio diversification.
- Britannia Industries Ltd (BOM:500825) has been recognized for its ESG efforts, achieving 100% plastic neutrality and receiving awards for its environmental impact.
Negative Points
- The company is facing an extraordinarily high inflationary environment, with commodity inflation at approximately 11%, impacting profitability.
- Market shares have remained flat due to price volatility, and the company has not taken significant price increases until recently.
- The company's profit after tax growth is only 4.8% over the past 12 months, which is lower than revenue growth, indicating margin pressures.
- There is intense competition from local players in the biscuit segment, which could impact market share and pricing strategies.
- The company has experienced volatility in staff costs due to stock appreciation rights, affecting quarterly financial performance.
Q & A Highlights
Q: How is Britannia Industries managing the high inflation, particularly in popular price points like INR5 and INR10?
A: Varun Berry, Executive Vice Chairman and Managing Director, stated that the company has taken a 2% price increase in Q3, which will rise to 4.5% by the end of the year. Local players face higher inflation due to Britannia's forward buying advantage. The company is adjusting prices as inflation persists.
Q: Are there concerns about competition from new players like Amul and Reliance in the biscuit market?
A: Varun Berry mentioned that there are currently no signs of concern from these competitors. He emphasized the importance of brand strength and noted that price competition has always existed, but Britannia's brands have remained strong.
Q: Can you provide insights into the growth of Britannia's adjacency products and the impact of e-commerce?
A: Varun Berry highlighted that e-commerce significantly benefits new products, with Croissant sales at 17% and dairy at 11% through this channel. The adjacency business, including croissants and milkshakes, is growing rapidly, contributing to overall growth.
Q: What is the impact of staff costs on Britannia's financials, and how does it relate to stock appreciation rights?
A: N. Venkataraman, CFO, explained that staff costs in Q3 were impacted by stock appreciation rights, with a INR75 crore effect due to share price changes. This cost is volatile and depends on share price fluctuations.
Q: How is Britannia handling price increases amid rising commodity costs, and what is the expected impact on margins?
A: Varun Berry stated that a cumulative 6.5% price increase is planned to counteract 11% commodity inflation. The company aims to maintain profitability through cost efficiencies and strategic pricing, despite the challenging environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
