Dairy companies: Winners and losers amid rising milk procurement costs

Hatsun Agro, Heritage Foods better placed than Parag, Prabhat

Rising costs of milk procurement is likely to pull down the Ebitda margins of leading dairy companies such as Parag Milk Foods (Parag), Prabhat Dairy (Prabhat) in the March 2017 quarter (Q4) even as the impact will be relatively less for names like Heritage Foods (Heritage) and Hatsun Agro (Hatsun; already announced its Q4 financials). 

Milk procurement costs have increased 15 to 20 per cent in the quarter on a year-on-year basis. However, there are two to three main factors determining the extent of margin impact for these companies.

Sourcing model followed by a dairy company

Dairy companies source milk