To raise prices soon; expects continued 20% turnover growth
Britannia Industries, the Bangalore-headquartered biscuit maker, today posted a 30 per cent drop in net profit at Rs 32.8 crore for the June quarter, due to higher prices of key commodities like flour and sugar.
However, net sales rose 24 per cent to Rs 912.8 crore, as sales volume increased by 20 per cent during the period. Higher input prices also affected operating margin, that dipped by 37 per cent to Rs 33.7 crore.
“We have delivered 25 per cent growth in sales, well ahead of the market, across our portfolios, backed by a strong 20 per cent growth in volume and price increases,” Vinita Bali, managing director, said. She said higher input prices had adversely affected the margins.
The company said in an intensely-competitive environment, it was focussed on “stripping down cost”. Earlier, Britannia had cut cost to the tune of Rs 250 crore to improve margin in last three-four years. “We still have leeway to cut down cost further in the near future and it will be significantly higher,” Bali told Business Standard.
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Will raise prices
She said price rises are likely. “Food inflation is close to 15-16 per cent, and in the biscuit industry there has been hardly any increase... It is quite likely that prices might go up, depending largely upon commodity prices. Its rise could be in the range of 5-10 per cent, if required, ” she said.
Earlier, addressing shareholders at the 91st annual general meeting, Nusli Wadia, chairman, said: “The impact of food inflation had been quite substantial. We are yet to overcome the impact of inflation push...hopefully, we will pass on the impact of commodity inflation, as the biscuit industry is the only one yet to raise prices.”
According to the annual report, improved realisation and cost control could not offset the steep rise in prices of commodities, especially sugar, which had inflation exceeding 70 per cent in the second half of the year.
This year, the company expected about 20 per cent growth in turnover, said Wadia. In the last quarter, net sales were Rs 912 crore, against Rs 731 crore in the same period last year.
Parle Products recently replaced Britannia as the country’s leading biscuit maker. Britannia’s market share is at 31 per cent. “If you include the glucose segment, yes, we are the second-largest player in the industry. However, excluding that segment, we have 40 per cent in the industry,” said Bali.
Wadia said issuing bonus shares is not being considered. “There is nothing on the agenda,” he told reporters, when asked to respond to reports in this regard.
New projects
The company intends to establish a new unit, beside augmenting capacity at its existing factories this year. It would finalise location of the new plant in the coming weeks and work was expected to start this financial year, said Bali.
“We had volume growth of 20 per cent, and we expect to see similar double-digit growth this year, too. We will create capacity to meet the market demand in segments like rusks, biscuits, bread and cakes,” she said. Adding: “Every year, our investments are close to Rs 70 crore.”
''Investment depends upon the location, which should be close to the market, and also on the tax benefit that we can get for the project,'' Wadia told shareholders.
Britannia has also planned to get into the Saudi Arabia market this year. It had earlier acquired two companies in West Asia.
“The company has revamped its marketing strategy and made significant brand investments that strengthened the competitive position, resulting in a market share increase in the GCC (Gulf Cooperation Council),” said Wadia.
The operations of the company in Sri Lanka were discontinued, as they were not viable, he added.