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Britannia: Other income fillip…

Jul 29, 2003

Britannia Industries has reported just over 3% growth in 1QFY04 topline. The company has however finished the June quarter with a significant 53% net profit growth.

(Rs m) 1QFY03 1QFY03 Change
Net Sales 3,266 3,369 3.2%
Other Income 10 86 760.0%
Expenditure 2,890 2,934 1.5%
Operating Profit (EBDIT) 376 435 15.7%
Operating Profit Margin (%) 11.5% 12.9%  
Interest 28 24 -14.3%
Depreciation 63 58 -7.9%
Profit before Tax 295 439 48.8%
Tax 91 148 62.6%
Extraordinary items (VRS) -17 -5 -70.6%
Profit after Tax 187 286 52.9%
Net profit margin (%) 5.7% 8.5%  
Effective tax rate (%) 30.8% 33.7%  
No. of Shares (eoy) (m) 26.9 25.1  
Diluted earnings per share* 29.8 45.6  
P/E ratio   12.1  
(* annualised)      

The significant rise in bottomline is largely led by a huge 760% growth in other income. This significant rise in other income has arisen out of profit on sale of investment as well as an excise duty refund. The company has not given out the break-up of this extraordinary income. If we exclude the other income component from the numbers, then profit before tax is up nearly 24% YoY

Cost break-up
(Rs m) 1QFY03 1QFY04 Change
Material cost 1,044 1,496 43.3%
Staff cost 396 210 -47.0%
Purchase of finished goods 1,251 1,000 -20.1%
Other expenditure 199 228 14.6%
Total expenditure 2,890 2,934 1.5%

An expansion in the operating margins has also aided the strength in performance. The company's staff cost has gone down by 47% during the quarter. The company's move to hive off its dairy business in 2002, as well as a VRS scheme seem to be the key reason for this fall in staff cost. Britannia's purchase of finished goods is also down 20% in the June quarter. However, the company's raw material costs are up a significant 43%, thus negating the gains from pruning of purchase of finished goods. Net, net, operating expenses grew by only 1.5%, vis-ŕ-vis sales growth of over 3% during the quarter.

The primary business of the company is now bakery, which consists of biscuits, bread and cakes. At the current price of Rs 553 the stock trades at 12.1x annualised 1QFY04 earnings, market cap to sales of 1x. However, the valuations are skewed owing to the other income fillip. Moreover, the recent controversy on the exit of the company's ex-MD (Mr. Sunil Alagh), has also raised promoter related concerns.


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