BRITANNIANSEQ4 FY23May 05, 2023

Britannia Industries Limited

7,390words
102turns
11analyst exchanges
7executives
Management on call
Varun Berry
VICE CHAIRMAN & MD, BRITANNIA INDUSTRIES LIMITED
Rajneet Kohli
EXECUTIVE DIRECTOR & CEO, BRITANNIA INDUSTRIES LIMITED
N. Venkataraman
EXECUTIVE DIRECTOR & CFO, BRITANNIA INDUSTRIES LIMITED
Vipin Kataria
CHIEF SALES OFFICER, BRITANNIA INDUSTRIES LIMITED
Amit Doshi
CHIEF MARKETING OFFICER, BRITANNIA INDUSTRIES LIMITED
Manoj Balgi
CHIEF PROCUREMENT OFFICER, BRITANNIA INDUSTRIES LIMITED
Mayank Mundra
INVESTOR RELATIONS, BRITANNIA INDUSTRIES LIMITED
Key numbers — 40 extracted
11%
#3 you will see our revenue profit as well as our market share trend; for the quarter we've grown 11% revenues, for the year that's gone by 15% revenue growth, operating profits for the quarter have
15%
as our market share trend; for the quarter we've grown 11% revenues, for the year that's gone by 15% revenue growth, operating profits for the quarter have grown by 47% and for the year it's at 30%.
47%
, for the year that's gone by 15% revenue growth, operating profits for the quarter have grown by 47% and for the year it's at 30%. Our market share gains continue and the gap with the second largest
30%
15% revenue growth, operating profits for the quarter have grown by 47% and for the year it's at 30%. Our market share gains continue and the gap with the second largest competitor has gone up in th
rs,
s we go forward. So, on the distribution front as you see we've got the number of rural distributors, which has gone up from 26,000 in March ‘22 to 28,000 in March ‘23. We've added 2000 distributors a
2 lakh
l India. We continue to gain more share in rural. If you look at our direct reach it's gone up by 2 lakh outlets. We've gone up from 25,000 to 27,000 approximately in terms of number of outlets reached
27 lakh
p from 25,000 to 27,000 approximately in terms of number of outlets reached directly by us, sorry 27 lakh outlets. Moving on to the next slide, which is on the marketing activities: This quar
40%
aal, which was started off in the east has now got extended to south and west and we are seeing a 40% sequential shift quarter-on-quarter. The Nutri Choice seeds and herbs, we are seeing a 50% sequen
50%
eing a 40% sequential shift quarter-on-quarter. The Nutri Choice seeds and herbs, we are seeing a 50% sequential shift quarter-on-quarter. Milk Bikis Classic which is launched in Tamil Nadu is also s
150 crore
e milkshakes from fresh milk and hopefully the quality will speak for itself. Winkin Cow is now a 150 crores brand. We are sourcing all of our aseptic PET from our new factory in Ranjangaon. Again, I would
100 crore
s which are there in most markets. Croissant, I've already spoken about. Basically, we joined the 100 crores club in this category. The base markets which are Tamil Nadu and West Bengal where we were doing
75%
They are also approximately 2 lakh beneficiaries of our Britannia Nutrition Foundation. We've got 75% female workmen in the new greenfield factories that we've commercialized this year. So, all very
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Guidance — 19 items
Chirag Shah
qa
“Can you just quantify the PLI amount number because this number is quite large and now as a percentage of PBT how should we think of that number going forward?”
N. Venkataraman
qa
“Now we are expected to get about 15 to 20 crores per quarter going forward.”
Varun Berry
qa
“This will be a one time and as we go forward it will be about 15 to 20 crores per quarter.”
Chirag Shah
qa
“15-20 crores per quarter would sustain into the next year.”
Chirag Shah
qa
“How has the share of LUPs for us really moved in the last couple of years and how do you see that going forward?”
Varun Berry
qa
“I would think it will be reasonably constant.”
Vivek Maheshwari
qa
“It will be closer to the full year average you are saying at the time when input prices have gone down.”
Arnab Mitra
qa
“My question was as the pricing anniversarizes and you also take some grammage increases, do you expect the volume growth to start picking up now or there could be a lag between the anniversarization of the price and the volume growth starting to pick up for your business?”
Vipin Kataria
qa
“Just to give you a perspective, the category has about 92 lakhs outlets, which will reach about 67 lakhs odd and therefore you can guess that the head space is that much.”
Avi Mehta
qa
“We are already at that end of the steady state guidance.”
Risks & concerns — 2 flagged
So, see it was a very uncertain period because the inflation we've never seen this kind of sustained inflation for such a long time for many years now.
— Varun Berry
It's just that the period was so uncertain that people were double guessing.
— Varun Berry
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Q&A — 11 exchanges
Q
I just had a couple of quick questions. When I look at the other operating income line, that has shot up very sharply in the last two quarters, this quarter it is almost 17% of PBT, what is that function of? I know there are some incentives from the state government that are included here but is there any lumpy revenue base that is sitting this quarter in the other operating income line?
Varun Berry
Yes, it's the PLI that we got from the government. As you know, there was the PLI scheme which was initiated by the government and we were one of the first applicants and we've got the benefit of that. Venkat, do you want to take that? Yes. So, the PLI essentially, this is for the year ‘21-22 and ‘22-23 that we have got in the Quarter 3 and Quarter 4. Sorry PLI for FY22 and ‘23 you've got it in the second half of this year, is that understanding right? For ‘21-22 we realized the money in the current year. So ‘21-22 and ‘22-23 came in the second half of the current year. That's what's sitting t
Q
First on the gross margin for this quarter, you reported I think probably the best ever. You did mention about the pricing action. So, to speak there is a bit of a mismatch between end consumer pricing versus what the spot input prices are. Where do you think the gross margin should settle at in the coming quarters?
Varun Berry
It will hover around the same, maybe a percent here or a percent there, won't make a big difference. You're talking about the exit rate? I'm talking about the year rate. The year not the exit, right? No. It will be closer to the full year average you are saying at the time when input prices have gone down. In fact, the other question I had was if you look at because wheat flour has hardened, most of your key inputs would have gone down. As an RM index if you look at where fourth quarter inflation would be quarter-on-quarter or year-on-year? Can you just repeat that? I'm saying Varun, you have
Q
My question is on volume growth, as the prices are now anniversarizes and also you are looking at some price as well as grammage increases.
Varun Berry
Your voice is not clear; we can't hear you properly. My question was as the pricing anniversarizes and you also take some grammage increases, do you expect the volume growth to start picking up now or there could be a lag between the anniversarization of the price and the volume growth starting to pick up for your business? I would certainly think so, but I don't worry too much about volume. I'm more worried about the number of packs that we sell. I would want to see aggressive growth as far as the number of packs that we sell. But yes, you're right even volume growth will definitely pick up t
Q
I just had a question regarding the difference in growth between standalone and consol. It's 14% in standalone and 11% at consol, what's that due to? And related to this what I also noticed is that the COGS figure in rupees crores is exactly the same in standalone and consol. I mean why would that be so despite the difference in revenue?
N. Venkataraman
There are couple of things which are impacting it. Out of diary the non-cheese portion of diary has already moved into Britannia numbers during the year starting May ‘22. So that is one which is impacting the growth between standalone and consolidated. The second that is happening is that with the JV arrangement with Bel and the whole thing transitioning into a distribution arrangement from April this year, the fourth quarter cheese sale it’s been accounted on a joint venture accounting basis and therefore the revenue doesn't appear there whereas the share of profits of Britannia is appearing.
Q
My question was around now we have full year FY23, if you could share the revenues for the non-biscuit portfolio and if possible, give some color on the main categories within the segment?
Varun Berry
The largest categories are cake, rusk and now dairy and bread. They are all approximately the same size about 600-700 crores each. These four categories are about 700 crores each and then we have international which is another 700-800 crores. These five categories and then we have got emerging categories like Croissant which is now 100 crores and then there are other small ones, adjacencies also, wafers and all would be another 100 crores. The second and last question was again coming back to revenue growth. You pointed out that pricing is going to moderate. I believe maybe a lot of the pricin
Q
My first question was with respect to the market share gains this year. I believe that we are doing something differently and I would attribute it to distribution but what has changed that is driving so much market share gains especially when we are taking so much price hike?
Varun Berry
One is distribution, second is the inherent strength of the brands. One thing that we always put on a back burner is the strength of brands and we truly own a stable of very solid brands. The combination of solid brands ably supported plus distribution plus the efficiencies that we are bringing, the freshness of the product that we produce and sell to the outlets with all the factories that we put up, the efficiency that we bring to the table, the quality of the products because these are new lines, technically much better lines than what we were using in the past. I think all that adds up. It
Q
Could you give us a sense of the competitive intensity especially because of your comment last time that you were seeing some enhanced competition in some pockets which did not need pricing action. So, I just wanted to understand why the change this time and should we read anything in the market share gain in rural basically moderating to 1.4X versus that 1.5X in 3Q and the gap reducing with what we saw in the graph last quarter as well?
Varun Berry
This much of variation happens. 1.5 to 1.4 is not a big deal. No, I don't see a substantial change in the competitive intensity. Yes, there are some categories where there is heavier intensity. There are categories like cake where there are lots of small players and even category like rusk where there are lots of regional players. What we are doing is we are taking very stringent action in those categories to make sure that one, we can produce the products at the right price; second, we can compete even with the local players. Earlier we used to not look at local players. Just to give you an i
Q
My question is on your distribution. For any company there will be at any given point of time an optimum level of direct distribution. Beyond that the cost benefit sort of equation is not advantageous. In your view at current point of time where do you think that ceiling lies beyond which it really doesn't make sense for you? Of course, that's a moving target, I'm saying as of today what is that number beyond which it doesn't make sense to go directly?
Varun Berry
No Percy the point is that we are already at about 90.7% weighted distribution and we are a joint #1 as far as weighted is concerned. The question can be how far do you want to go. If you have already got up to (+90%) then how far do you want to go? But the other side of the coin is that there is this huge territory which is the Hindi belt where the gap so let's say the gap between us and the #2 player in share but the #1 player in distribution. Today we are still lower than them by about 5 lakh outlets. Now if you were to look at the same gap in the Hindi belt, it will be huge. There will be
Q
One question to start with the volume growth. If we look at the full year growth at 15%, is it fair to assume that the volume growth would be in the range of about 2%-3% for full year FY23?
Varun Berry
About that much yes. It's very small, small single digits. And similar number for Quarter 4 also? Yes. The second question, you always been guiding us that the new product contribution number. Would you have in mind what number we ended in FY23 and what we should be expecting in FY24? With FY23 we have done, the way we qualify new products is new products which have been launched in the last 24 months. The last 24 months products are approximately 3%-3.5% of our total revenue and we are trying to scale that up as we go forward to about 4% in ‘23-24. And last question on the manufacturing units
Q
You mentioned that there's a strategy to make in house. Can you talk more about this? What is the current mix of in-house, how will this change with new factories and whether the productivity would reflect in margins?
Varun Berry
So, it's not changing dramatically. It will probably go from, inhouse will go from 57% to about 65%. But certain product categories it will be a much larger change. For example, rusk, we had in house only one line for domestic. We had one line in Mundra for international business but for domestic there was only one line in our Madurai factory and now we are putting up three more lines. So that will move up dramatically but biscuits overall will only move up from 57% to 65%. Second is what’s the rationale for launching coconut water and would you look for a larger play in the beverages category
Q
Thank you everyone for spending time with us on this call today. We will look forward to interacting with you again.
Varun Berry
Thank you guys.
Speaking time
Varun Berry
38
Moderator
13
Chirag Shah
7
Vivek Maheshwari
7
N. Venkataraman
6
Shirish Pardeshi
6
Sheela Rathi
5
Arnab Mitra
3
Vipin Kataria
3
Percy Panthaki
3
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Opening remarks
Mayank Mundra
Thanks Dorwin. 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 Q4 Financial Year ‘22- 23. Joining us today on this Earnings Call is our Vice Chairman and Managing Director – Mr. Varun Berry, Executive Director and CEO – Mr. Rajneet Kohli, Executive Director and CFO – Mr. N. Venkataraman; Chief Sales Officer - Mr. Vipin Kataria, Chief Marketing Officer - Mr. Amit Doshi and Chief Procurement Officer - Mr. Manoj Balgi. The Analyst Deck is uploaded on our website. Before I pass it 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 evening. Sorry to draw you out so late in the evening, so let's get to the deck. On Page #3 you will see our revenue profit as well as our market share trend; for the quarter we've grown 11% revenues, for the year that's gone by 15% revenue growth, operating profits for the quarter have grown by 47% and for the year it's at 30%. Our market share gains continue and the gap with the second largest competitor has gone up in this quarter as well. Moving to the next slide, which is our regular slide which gives us the five strategic pillars which we drive to get profitable growth. I'll take each one of these as we go forward. So, on the distribution front as you see we've got the number of rural distributors, which has gone up from 26,000 in March ‘22 to 28,000 in March ‘23. We've added 2000 distributors and the rural market share gain is 1.4 times of what we have for all India. We continue to gain more share in rural. If you look at our direct reach it's gone up by 2 lakh outlets. We'
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