Britannia Industries Limited
7,730words
71turns
7analyst exchanges
8executives
Management on call
Varun Berry
VICE CHAIRMAN & MANAGING
Rajneet Kohli
EXECUTIVE DIRECTOR & CHIEF
N. Venkatraman
EXECUTIVE DIRECTOR &
Vipin Kataria
CHIEF SALES OFFICER – BRITANNIA INDUSTRIES LIMITED
Amit Doshi
CHIEF MARKETING OFFICER – BRITANNIA INDUSTRIES LIMITED
Manoj Balgi
CHIEF PROCUREMENT OFFICER– BRITANNIA INDUSTRIES LIMITED
Sudhir Nema
CHIEF DEVELOPMENT & QUALITY
Mayank Mundra
INVESTOR RELATIONS – BRITANNIA INDUSTRIES LIMITED
Key numbers — 40 extracted
22%
ad a very good quarter so we got revenue from operations, which has seen a year-on-year growth of 22% and a quarter-on-quarter growth of 19%. Operating profits have grown 30% year-on-year and 47% on
19%
e from operations, which has seen a year-on-year growth of 22% and a quarter-on-quarter growth of 19%. Operating profits have grown 30% year-on-year and 47% on quarter-to-quarter basis which is seq
30%
a year-on-year growth of 22% and a quarter-on-quarter growth of 19%. Operating profits have grown 30% year-on-year and 47% on quarter-to-quarter basis which is sequential. Market share continues to b
47%
of 22% and a quarter-on-quarter growth of 19%. Operating profits have grown 30% year-on-year and 47% on quarter-to-quarter basis which is sequential. Market share continues to be a very good story,
8%
ned from inflation standpoint so if you look at consumer food price inflation year-on-year Q1 was 8% and Q2 is almost in the same vicinity. We know what has happened to the Indian rupee versus the U
Rs.82
e vicinity. We know what has happened to the Indian rupee versus the US dollar it is now at about Rs.82 while the wheat prices in the international markets have gone down a bit and similarly palm is giv
12%
has not happened in India and the reason for that is that we have had a lower crop which is about 12% lower than last year as a result of that the wheat prices have held fairly firm this quarter. M
32%
hat has happened in the last seven quarters. In the last seven quarters we have seen inflation of 32% so if you were to index Q3 of 2021 as from 100 we moved to 132% so that is a huge inflation in se
132%
quarters we have seen inflation of 32% so if you were to index Q3 of 2021 as from 100 we moved to 132% so that is a huge inflation in seven quarters and as you see that that it is not just
25%
een moving up and this if you were to look at the key components of this inflation wheat flour is 25%, industrial fuel is almost 40% and palm oil is on a year-on-year basis 10%. Overall this is the f
40%
e to look at the key components of this inflation wheat flour is 25%, industrial fuel is almost 40% and palm oil is on a year-on-year basis 10%. Overall this is the first time that inflation has no
10%
flation wheat flour is 25%, industrial fuel is almost 40% and palm oil is on a year-on-year basis 10%. Overall this is the first time that inflation has not just been in one country but across the gl
Guidance — 17 items
“What we do expect is that Q3 we do expect some respite on the back of palm oil.”
“Milk prices continue to be on the boil, which has impacted our dairy profitability and wheat prices we do expect these to be firm in Q3 as well so that is the current situation and the outlook as far as commodities is concerned in a concise short capsule.”
“As a result of that you will see the percentages, the percentages have moved up if you look at 2019-2020 profit from operations was 14.5% that was the pre-COVID year and now we are at slightly better than what we were at in 2019-2020, so happy with that progress and hoping that we will be able to keep that trajectory.”
“As the matter is subjudice I do not think it is right to comment on that any further than this but happy to clear if there is any more information that we get we will be happy to clear any other doubts that you may have on a larger basis.”
“My second question is on the management change with Rajneet joining what will be the role division between the CEO and MD, Executive Vice Chairman and should we expect any changes in the strategy?”
“He will also use his digital e-commerce experience to build a pathway to bringing Britannia’s digital quotient up and building digital interface which can make this company into a data driven organization so I think that will be a big part of his agenda as well.”
“My first question was on the commodity inflation you mentioned that 32% number given where palm is currently and the rest of commodities are how would you expect this to trend in 3Q, 4Q and in that context do you then expect your gross margins to continue to sequentially improve from where it is in this quarter?”
“I think things will be equal to or slightly better.”
“You have seen this sequential 7% price increase and yet volume growth has actually probably slightly stepped up in a relatively weak macro environment so from what you have seen on the ground are you reasonably confident that the price hike has been well absorbed and there will be no negative effect on volumes going ahead and therefore there is complete step up in the quarterly run rate any concerns that could kind of slowdown as pricing starts affecting volume?”
“I think two things just one observation on slide 10 you have seen so many new products so I was more keen at least the trade is very positive on Croissant so maybe if you can help me what is the number we look at this year and maybe next year specifically for Croissant?”
Risks & concerns — 5 flagged
The share gains in rural are approximately one-and-a-half times what they are in urban so that has helped us and a lot of companies have called out a slowdown in rural.
— Varun Berry
As a result of our programmes we have not seen that slowdown in our business and if you were to look at it we have build our rural sales by almost four times in the last six-and-a-half years, which has given us the rural momentum as we said earlier as well rural has not been a stronger force for us we have always been slightly weaker in rural and that is what we are trying to fulfill.
— Varun Berry
So there has been from about Rs.31 we have gone to Rs.41 so there is a very high inflation on dairy and while we are taking price increases this is turning out to be a lot more than what we had ever imagined so profitability remains challenge as far as dairy is concerned.
— Varun Berry
You have seen this sequential 7% price increase and yet volume growth has actually probably slightly stepped up in a relatively weak macro environment so from what you have seen on the ground are you reasonably confident that the price hike has been well absorbed and there will be no negative effect on volumes going ahead and therefore there is complete step up in the quarterly run rate any concerns that could kind of slowdown as pricing starts affecting volume?
— Arnab Mitra
The pressure on dairy is not topline at this time.
— Varun Berry
Q&A — 7 exchanges
Q
Yes thanks and congrats on a very good set of numbers. If I see last five quarters sales has been stable at 3300 to 3600 Crores number quarter-on-quarter jump of 18% so I had question on that how much would be the pricing growth quarter-on-quarter plus biggest festive was earlier this time how much is one-off because of the inventory built up because of the festive season-related pipeline filling and when I refer to slide number 10 your new products have seen very strong growth quarter-on-quarter 70% to almost 2.9x quarter-on-quarter so is there inventory filling because of that because you ar
Varun Berry
There are no one offs Abneesh. Abneesh I must say that Abneesh from Nuvama sounds a little funny we are used to your Edelweiss so I was a little taken aback, but to answer your question first of all no one time at all it is all progress made from a zero base, we have seen very good demand, we have been able to do enough for our brands this quarter, we have taken a step back on that but we have gone back on it, we are supporting our brands and we have done a lot of innovation as I have spoken through the deck and that is giving us momentum with our customers and this is despite the fact that we
Q
Yes thanks for a great quarter and thanks for the opportunity. My first question is on raw material so in raw material what would be the broad breakup between wheat, edible oil, sugar, fuel and how much wheat inventory do you typically hold and how does the wheat procurement work do you mostly acquire after the rabi harvest?
Varun Berry
Wheat, palm oil and sugar are the three largest components as far as we are concerned. Manoj do you want to comment. So wheat, palm oil and sugar roughly together would constitute about 65% of the value of procurement and wheat is typically procured during the harvesting season that is in April, May, and June. What is your initial view right now, do you think wheat prices will ease up or any initial due there? Wheat prices are quite high and I think government is taking actions to stabilize those. My second question is on the management change with Rajneet joining what will be the role divisio
Q
Hi Varun and team. My first question was on the commodity inflation you mentioned that 32% number given where palm is currently and the rest of commodities are how would you expect this to trend in 3Q, 4Q and in that context do you then expect your gross margins to continue to sequentially improve from where it is in this quarter?
Varun Berry
I do think that prices are going to stabilize. Palm oil has already shown some signs of stabilizing, it actually went down quite a bit before surging a bit upwards thereafter, but in wheat because the country has produced less wheat I think that is going to remain a little firm till the time the next season comes through. As far as sugar is concerned we are seeing a little bit of upside as far as sugar is concerned and I have already spoken about milk and milk products that is on the complete boil so I do not think it is going to cool down substantially but yes it is going to be stable to slig
Q
Hi good morning. Hearty congregations Varun for becoming Vice Chairman. I think two things just one observation on slide 10 you have seen so many new products so I was more keen at least the trade is very positive on Croissant so maybe if you can help me what is the number we look at this year and maybe next year specifically for Croissant?
Varun Berry
So we are looking at exit rate of about 150 Crores which is I would say a reasonable number for a product which has just been launched. Okay and you normally used to give the NPD contribution what was the NPD contribution in Q2? It is approximately 3.5% of the revenue. See the thing is that our overall revenue has also been growing pretty fast but this is in our definition. If you were to look at the total NPD contribution it will probably be about 5% because we look at a shorter period that is why it is 3.5% but overall it will be about 5%. It is interesting to see that last year we started w
Q
Hi team very impressive performance given the context so I got one clarification on the sales part of it and the other one on the marketing part of it and if time permits just also want to understand 5.8% loan it appears extremely good so just was wondering if you could tell us where it is available if it is PP or something like that, anyway so the first thing is on the sales side of it Varun could you just help us understand the exact modalities which you are actually using to get this sort of outcome, for example you talk about 28% if this sub stockist or is it actual distributors, point num
Varun Berry
These are distributors but they are not as organized as our large distributors. They are appointed in a smaller area, they cover anywhere from 40 to 100 outlets in their area. These are all small areas which are rural, small town, villages, etc., 10,000 kind of population kind of areas. Now what we have with them we do have handles and we do get data their sales, etc., we get all of that data but obviously the quality of supervision, etc., tends to be I would say much below what we do with our larger distributors. It is a hub and spoke model that we do because we have to break bulk as far as t
Q
Hi Sir. I just wanted to ask on the margin side clearly we are seeing while input costs have risen you have been able to kind of pass them on quite effectively we are arguing that input cost remains quite stable and are likely to kind of moderate down in that kind of context would you say that a path forward to reach back to the 18% to 19% EBITDA margin exist?
Varun Berry
Listen I think we also dream like you. Those numbers were reached during COVID. Yes obviously we would want to endeavor to get to higher numbers but I think it is important that we make this as gradual as possible and create funding opportunities for new products or new categories and we support these new products and get them to be of a certain size. The problem is that it is not a problem actually it is actually a good thing but the base business is so large that 150 to 200 Crores kind of innovation becomes a drop in the ocean. So we have to create much larger pieces of innovation as we go f
Q
Thanks everyone for spending time with us on this call today. We look forward to interacting with you again.
Opening remarks
Mayank Mundra
Thanks Steven. Hello everyone this is Mayank from the investor relations team. I welcome you all to the Britannia earnings call to discuss the financial results of Q2 2022-2023. Joining us today on this earnings call is our Vice Chairman & Managing Director, Mr. Varun Berry; Executive Director & CEO Mr. Rajneet Kohli; Executive Director and CFO Mr N. Venkatraman, Chief Sales Officer Mr. Vipin Kataria, Chief Marketing Officer Mr. Amit Doshi, Chief Procurement Officer Mr. Manoj Balgi, and Chief Development and Quality Officer Mr. Sudhir Nema. The analyst deck is uploaded on our website. Before I pass on to Mr. Varun Berry I would like to draw your attention to the safe harbor statement in the presentation. Over to Mr. Varun Berry with remarks on the performance!
Varun Berry
Good morning everyone. So let me just jump onto page three of the presentation. If you look at this you will see that we have had a very good quarter so we got revenue from operations, which has seen a year-on-year growth of 22% and a quarter-on-quarter growth of 19%. Operating profits have grown 30% year-on-year and 47% on quarter-to-quarter basis which is sequential. Market share continues to be a very good story, it is the 38th quarter of market share gains for us, which is a very, very positive story and this comes out of all the hard work that the team has put in not just building and nurturing strong brands but getting the distribution of all our products and more and more outlets across the country and I will come to those details in a minute. If you move on to the next page this shows you what has happened from inflation standpoint so if you look at consumer food price inflation year-on-year Q1 was 8% and Q2 is almost in the same vicinity. We know what has happened to the India