Milkman drives Britannia's 1Q profit growth - Views on News from Equitymaster

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Milkman drives Britannia's 1Q profit growth

Jul 25, 2000

Higher bakery and dairy product sales powered Britannia's topline which has increased by 16% YoY to Rs 3.3 bn in 1QFY01. The company has a large presence in the biscuits market and revenues from biscuits contributes nearly 70% to its total turnover. In the current quarter biscuits volumes are up by 15% led by its recently launched products Vita MarieGold and Nutrichoice Good Morning. While favourable raw material prices helped the company to improve its profit margins to 7.9% (from 7% in 1QFY00), increase in other expenses by 20% slowed down the margin growth. Duty to hike in excise duty rate of biscuits and cakes from 8% to 16% operating margins witnessed slower growth rate.

(Rs m) 1QFY00 1QFY01 Change
Sales 2,866 3,320 15.8%
Other Income 22 13 -40.9%
Expenditure 2,666 3,057 14.7%
Operating Profit (EBDIT) 200 263 31.5%
Operating Profit Margin (%) 7.0% 7.9%  
Interest 19 19 0.0%
Depreciation 41 46 12.2%
Profit before Tax 162 211 30.2%
Other Adjustments 3 7  
Tax 53 69 30.2%
Profit after Tax/(Loss) 106 135 27.4%
Net profit margin (%) 3.7% 4.1%  
No. of Shares (eoy) (m) 18.6 27.9  
Diluted number of shares 27.9 27.9  
Diluted Earnings per share* 15.2 19.4  
*(annualised) 109 142  

Apart from being a leader in biscuits market, Britannia has slowly expanded its reach in dairy business with the launch of flavoured milk, butter and ghee under the 'Milk Man' umbrella. The company plans to double the turnover from the dairy business in next three years, which presently contributes around 20% to its total turnover. In this business it faces the strong competition from Amul and Nestle.

Britannia quotes at a P/E multiple of 33 times its 1QFY01 annualised earnings at the current market price of Rs 639. The company's market cap to sales ratio is among the lowest in the FMCG industry.


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