Britannia Industries reported strong results for Q4FY18, in-line with consensus estimates. Company reported net sales (net of excise duty in the base quarter) growth of 13.1% yoy to Rs2,537.5cr. Led by cost control initiatives, company reported strong EBITDA growth of 28.9% yoy to Rs397.1cr. Other expenses as percent of net sales declined by 173bps, leading to 192bps yoy expansion to 15.6%. PAT grew by 24.8% yoy to Rs263.2cr.
Company reported healthy revenue growth on the back of double digit volume growth (12.5% yoy) led by investment in brands and increasing distribution network. Company has been focusing on increasing its direct reach especially in the rural market and weak states.
Company has delivered higher than strong growth during the year in Gujarat (16%), Rajasthan (27%), Madhya Pradesh (15%) and Uttar Pradesh (15%). Uttaranchal, Bihar and Haryana also reported strong double digit growth during the year.
Company continues its efforts on expansion of its direct reach, the current direct reach stands at 19lakh outlets.
Further, company continued its focus on premiumisation and new launches during the quarter. It launched Milk Bikis Good Morning, Nutri Choice Oats Chocolate & Almond, 50-50 Jeera and revamped the Tiger Cookies portfolio.
Company is reducing commoditized products in the dairy segment and increasing its focus on the value added dairy products. This has led to subdued revenue growth in segment, however it has led to improvement in the profitability.
Other income during the quarter was up by 32.5% to Rs44.4cr.
Company’s international business also reported double digit growth despite a slow-down in Middle East and Africa.
Company recommended a dividend of Rs25 per share for FY18.
Growth outlook and capex plans:
Company expects the raw material costs to remain stable in 1HFY19. In FY2018, the increase in duties on refined palm oil was offset by weakness in prices of sugar and milk in particular.
The cost efficiency program delivered savings of Rs225cr (~230bps of sales) in FY18 and the company aims to extract more cost savings in FY19E.
Company’s greenfield factories at Guwahati, & SEZ in Mundra for servicing export markets have been commercialized during the quarter. Further, company is also setting up an integrated food park at Ranjangaon, Maharashtra & a Greenfield plant at Nepal. Company’s depreciation cost during the quarter has jumped by 31.5% yoy and 28.8% qoq to Rs42.4cr.
The company has significant capex planned over the next 2-3 years. The Ranjangaon is the main one with a total capex of Rs1,000cr over the next 2-3 years. All the company’s products will be manufactured at this site. Total sales of Rs4,000cr can be generated from the plant, once it achieves full capacity.
Setting up milk procurement and processing unit at Ranjangaon would help the company in getting a better handle on biscuit manufacturing. Currently, dairy products such as whey and SMP worth Rs30-35cr are being used in the manufacture of biscuits. Besides, it would also aid in being more competitive in the value-added dairy industry.
Company has indicated that it will be on bridging portfolio gaps in the bakery business and other adjacent macro snacking business opportunities in FY19E. Management indicated that FY19 would be a benchmark year in terms of innovations owing to its strong and wide pipeline of new products.
Britannia Industries Ltd is currently trading at Rs. 5,448.65, down by 10.55 points or 0.19% from its previous closing of Rs. 5,459.20 on the BSE.
The scrip opened at Rs. 5,494 and has touched a high and low of Rs. 5,505 and Rs. 5,419.20 respectively. So far 1,48,070 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 50 DMA.
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