Britannia Industries Share Q3 Results

Britannia Industries reported robust 12.93% growth in total sales revenues on a YoY basis for the Dec-21 quarter at Rs.3,575 crore. During the December 2021 quarter, Britannia reported high single-digit growth in volumes thanks largely due to its niche presence and leadership in most of the food segments that it operates in. On a sequential basis, the revenues were down by just -0.90%, showing sequential pressure on the revenues.

One of the big challenges faced by Britannia in the quarter was the slowdown in the rural markets across the FMCG verticals. There was a significant slowdown in the quarter. Good Day biscuits was re-launched with the concept of “Multiple smiles per pack” and that managed to maintain customer visibility. As the market leader, Britannia managed to effect price increases across categories, although that was not fully enough for 20% inflation.

Let us not turn to the operating profits. For the Dec-21 quarter, operating profits were down on a YoY basis by -13.07% at Rs.489.34 crore due to the pressure of higher input costs playing on the profits. During the quarter, Britannia witnessed pressure due to a 20% spike in input cost inflation on a YoY basis. However, only part of these cost spikes could be passed on to the customers as higher prices.

In terms of specifics, the company saw a YoY spike of 22% in the raw material costs at Rs.1,818 crore. In addition, the inventory maintenance costs were also higher by 40% YoY and that also took its toll on the numbers. Price hikes were always going to be constrained by the leeway offered by competition. Operating margins fell from 17.78% in Dec-20 quarter to 13.69% in the Dec-21 quarter. Even on sequential basis, the operating margins were lower.

Net Profits of Britannia for the Dec-21 quarter was down -18.56% year on year at Rs.371.18 crore as the weak operating performance was effectively transmitted to the bottom line too. The net profit growth was also impacted by the fact that the other income component was also sharply lower in the quarter on a YoY basis.

This had its impact on the debt servicing strength of the company. For example, due to higher debt and lower profits, the interest service coverage and debt service coverage ratio or the DSCR were visibly lower on YoY basis. PAT margins fell rather sharply from 14.40% in the Dec-20 quarter to 10.38% in the Dec-21 quarter. However, PAT margins were lower on a sequential basis by just about 27 bps.