Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Britannia: Food inflation affects bottomline - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Britannia: Food inflation affects bottomline

May 28, 2010

Britannia Industries Limited has announced its FY10 results. The company has reported a 9.3% YoY gain in sales and 35% YoY fall in net profits. Here is our analysis of the results.

Performance summary
  • Top line for Britannia during FY10 grew by 9% YoY.
  • Operating (EBITDA) margins for the company fell by 3.6% to 5.1% during the year. This lacklustre performance is due to higher raw material costs as well as higher advertisement spending and higher other expenditure as a percentage of sales.
  • Net profit fell by 35% YoY during the year.

Standalone Financial snapshot
(Rs m) FY09 FY10 % change
Net Sales       31,258       34,166 9.3%
Expenditure       28,533       32,413 13.6%
Operating profit (EBDITA)         2,725         1,753 -35.7%
EBDITA margin (%) 8.7% 5.1%  
Other income            258            401 55.4%
Interest            117               42 -63.8%
Depreciation            335            376 12.2%
Profit before tax         2,531         1,736 -31.4%
Exceptional items           (206)           (529)  
Tax            521               43 -91.8%
Profit after tax/(loss)         1,804         1,165 -35.4%
Net profit margin (%) 5.8% 3.4%  
No. of shares (m)               24               24  
Diluted earnings per share (Rs)*   48.8  
Price to earnings ratio (x)*   34.5  

What has driven growth in FY10?
  • As noted, the sales of the company grew by 9%. However, this comes on the back of 21% growth registered for FY09.

    Cost break-up
    As a % of net sales FY09 FY10
    Total cost of goods 61.1% 63.5%
    Employee costs 3.1% 2.9%
    Conversion and other charges 8.5% 8.4%
    Advertisement costs 6.8% 7.9%
    Other expenditure 11.8% 12.2%

  • Operating income for the company fell by 36% YoY. This was on the back of rise in commodity prices and higher advertisement costs. Raw material costs increased by 14% as a result of high sugar and milk prices. Advertisement spending for brand building was up by 27% YoY and competitive pressure mounted.

  • Net margins for Britannia fell by 2.4% to stand at 3.4%. This performance comes on the back of fall in operating income partly offset by higher other income, lower interest costs and lower tax expense.

What we expect?
At the price of Rs. 1,680, the stock is trading at 15 times our estimated FY12 earnings. The company is suffering from rising food inflation and increase in competition. While the prices of raw material are expected to soften, the competitive intensity is a cause for concern. For this reason we are cautious on the company.

To Read the Full Story, Subscribe or Sign In
To Read the Full Story, Subscribe or Sign In

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms


Mar 20, 2019 (Close)


  • Track your investment in BRITANNIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks