Britannia volume growth aided by product launches, innovation
Britannia Industries recorded a volume growth of 5% during the September quarter, led by innovations, product launches and distribution expansion. The company’s volume growth came amid a weak demand environment led by inflationary pressures with the FMCG industry’s volumes declining 6% during Q2.Britannia’s volume growth was accompanied by a much higher price growth as it took a price hike of 7% compared with the previous quarter and 18% against last year to pass on the raw material cost inflation to customers.
“We have done a lot of innovations which has given us momentum despite the fact we have taken a price increase… and the distribution build we are doing has also got our share up,” MD Varun Berry said during a post-earnings analyst call on Monday. The company has appointed 28,000 rural preferred dealers and is focusing on direct distribution to enhance rural footprint. During July-September, Britannia posted a 22% on-year increase in sales at Rs 4,338 crore with a net profit rising 28% to Rs 490.58 crore. The company’s earnings surpassed Bloomberg estimates, which pegged Britannia’s sales at Rs 4,397.0 crore and a profit at Rs 428 crore.
During the quarter, Britannia’s operating margin also improved 80 basis points to 16.3% on the back of pricing actions and cost savings.The company’s pre-Covid Ebitda margin used to be 18-19%, but Berry said that the company is no hurry to catch up with it but would rather focus creating finding opportunities for new products and innovations.“We are trying to see how we can make each one these categories fairly large. We have to create large pieces of innovations as we go forward,” he said.
On raw material inflation in Q3 and Q4, Berry said he doesn’t see prices of wheat, palm oil or sugar cooling down substantially, but could rather be ‘stable to slightly cooling down’. On Monday, the company’s shares closed at Rs 4,142.20 on the BSE, up 8.97% from Friday’s close as investors cheered company’s upbeat Q2 results.
