Britannia sees bleak Q3 due to demonetisation impact

Biscuit major Britannia Industries Ltd has witnessed sales of its biscuits and other products drop after the withdrawal of Rs 500 and Rs 1000 notes as legal tender by the government, which could see earnings dip in the third quarter in December.

The biscuit making company says that they are expecting to be hit by 15 to 20% in the next 45 days due to the demonetisation.
 

"Consumers will spend on essentials. Everything that people think is essential will be bought and discretionary items will not be bought for some time until cash does not flow back into the economy. FMCG's will be affected and it will be a weak consumption until December at least, " said Varun Berry, managing director of Britannia.

Berry says that while speaking to various retailers he found out that sales of retailers have been hit anywhere between 30 to 70% post the demonetisation. The variation is mainly on the basis of whether they have a credit card machine or not.

"The situation will get better as we go forward and more money come into the economy. I have not done the math on how it will effect the next quarter profits. It is like nature's force that can not be predicted," said Berry.

Britannia said earlier this month that it expects higher growth in the coming quarters hoping to reap on extra cash that consumers have due to a better monsoon and the Centre's 7th pay commission bonanza.

Berry along with minister for industries R V Deshpande inaugurated the first manufacturing and R&D centre for the company in Bidadi Bengaluru. The new centre in which the company has invest Rs 200 crore will have the capacity of hundred thousand tonnes production. The company was currently working with six partners in Karnataka for packing their products and with the manufacturing unit, it will be a 60 to 40 ratio. Currently, the revenue of the company is Rs 8,500 crore out of which 7% of the business is from Karnataka.

Berry also says that Britannia is looking at moving from being just a bakery company to a global foods company and will double its turnover in the next 5 years.

"We are looking to be a global foods company. We will enter any segment that we can gain success in. In the next 5 years, Britannia will be double of what we are now. I do not know how we will do it but we will do it," he said.

The company in the second quarter profits grew 5.84 per cent to Rs 234.03 crore and revenue grew 10.27% to Rs 2456.10 crore. The company had attributed the growth to more consumption of biscuits from rural consumers.

Britannia's stock closed 0.23% or Rs 6.65 at Rs 2901.35 on Tuesday on the Bombay Stock Exchange.