Analyst Meet / AGM - Analyst Meet
Biscuit category is witnessing slowdown
Britannia Industries held an analyst meet to discuss its Q1 FY14 results.
Highlights-
The standalone net sales for Q1 have increased by 15% to Rs 1416.31 crore. OPM has increased by 327 bps to 9.2%. The net profit has increased by 99% to Rs 86.29 crore due to expansion in margin and decline in interest cost.
The consolidated revenue for Q1 have increased by 15% to Rs 1551.51 crore. OPM has increased by 299 bps to 8.88%. The net profit has increased by 93% to Rs 89.49 crore
The mgmt said that the improvement in profitability has been due to relatively stable input prices, improvement in product mix and cost reduction initiatives. Also the company's key high margin brands products have been witnessing double digit growth rates during the past few quarters which have helped its profitability.
Also added that margin improvement is also due to overall effort to reduce the expenditure and improve efficiency. There has been cost reduction initiatives across the value chain. The company has focused on improving utilization levels both in manufacturing and distribution. In manufacturing, the company has focused on setting up plants in states like Orissa and Bihar as eastern region has witnessed the fastest growth in demand, thus reducing supply and distribution cost. Further it has focused on larger & owned plants and better technology in manufacturing to avail scale benefits and reduce the cost of production. It has also patented some of the manufacturing technology. The company has worked on savings in energy cost at the factory level. On the distribution front, it has been working on improving sales output per sales person, reducing inventory at the retail level and improving retail availability and value per transaction
The mgmt said that biscuit category is also witnessing slowdown due to cut in discretionary spends. Despite the moderation in sales growth, the company does not expect any price competition within the industry because input cost though stable is still at elevated levels. The competition from smaller players has not witnessed any increase. The market shares of smaller players have remained constant at about 25-27% of the total industry. This has been despite the entry of new players. Some of the old smaller players have exited the category.
A favorable monsoon during the year is expected to drive rural demand in the short term. As a result, the company has been focusing on increasing rural distribution and small unit packs. The company is focusing on improving its reach in rural markets to drive sales growth
The mgmt believes that the food security bill may not lead to further inflation and will have a positive impact on rural demand.
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