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Higher cocoa prices snip Cadbury’s first quarter margins - Views on News from Equitymaster
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  • Apr 20, 2000

    Higher cocoa prices snip Cadbury’s first quarter margins

    Cadbury India has maintained an impressive 20% growth in the topline for the first quarter. However, the operating margins have dipped by 1% primarily because the company had contracted for cocoa, its main raw material at the higher prices of approximately £1200/ton last year.

    The cocoa prices currently rule at around £ 600/ton and the management has indicated that the stocks contracted at the older rates would be over within the next three weeks. Thus raw material costs can be expected to drop substantially for the company from the second quarter of the year.

    (Rs m) 1QFY1999 1QFY2000 Change
    Sales 1,161 1,393 20.1%
    Other Income 8 17 123.4%
    Expenditure 978 1,191 21.8%
    Operating Profit (EBDIT) 183 203 11.1%
    Operating Profit Margin (%) 16% 15%  
    Interest 12 8 -33.3%
    Depreciation 46 50 8.7%
    Profit before Tax 132 162 22.4%
    Tax 39 55 41.0%
    Profit after Tax/(Loss) 93 107 14.7%
    Net profit margin (%) 8.0% 7.7%  

    The most encouraging part of the topline growth in the first quarter was the fact that the company could recover lost ground in the metro cities. These contribute almost 30% of the company’s turnover and the growth of the company’s brands in the metros was not satisfactory last year. In the first quarter the company’s sales in the two metro cities Mumbai and Calcutta rose 15% in volume terms.

    Over the last year, the company regained its share in the food drinks market by re–launching ‘Bournvita’. More important the last year witnessed the highest growth for Cadbury’s biggest brand ‘Cadbury Dairy Milk’ which grew 41% in volume terms. ‘Eclairs’ too grew by 14% in volume terms. The notable failures for the company were its sugar confectionery brand ‘Googly’ and its chocolate brand ‘Picnic’.

    Overall, the management was confident of the company being able to maintain an overall volume growth of 12% and a value growth of 20% in the current year too.



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