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Britannia: Leaner post dairy…

Aug 1, 2002

Britannia Industries has reported a 7% dip in 1QFY03 topline. However, the performance is not comparable with 1QFY02 as during that time Britannia operated the dairy business too. This business has been transferred effective March 27, 2002 to Britannia New Zealand Foods Pvt. Ltd., a joint venture with Fonterra Group, New Zealand. On a comparable basis net sales have, infact, increased by 6%.

(Rs m)1QFY021QFY03Change
Net Sales3,4943,266-6.5%
Other Income1210-16.7%
Expenditure3,1632,890-8.6%
Operating Profit (EBDIT)33137613.6%
Operating Profit Margin (%)9.5%11.5% 
Interest 3628-22.2%
Depreciation536318.9%
Profit before Tax25429516.1%
Tax819112.3%
Extraordinary items (VRS)-11-1754.5%
Profit after Tax16218715.4%
Net profit margin (%)4.6%5.7% 
Effective tax rate (%)31.9%30.8% 
No. of Shares (eoy) (m)27.926.9 
Diluted earnings per share*24.127.8 
P/E ratio 18.4 
(* annualised)   

Despite the exclusion of dairy numbers in 1QFY03, Britannia has managed a 15% growth in net profit. This itself indicates what a drain the dairy business must have been on its resources. The company's operating margins have improved post the hive off of dairy operations to 11.5%. For the full year FY02, operating margins stood at 9.4%.

cost break-up
(Rs m)1QFY021QFY03Change
Material cost1,0981,044-4.9%
Staff cost195396103.1%
Purchase of finished goods5701,251119.5%
Other expenditure1,300199-84.7%
Total expenditure3,1632,890-8.6%

A look at the cost break-up table indicates a huge dip in other expenditure. This expenditure seems largely pruned as a result of the dairy hive off. However, another trend that comes to the fore is the significant increase in purchase of finished goods. This could indicate Britannia increasingly moving towards outsourcing.

The primary business of the company is now bakery, which consists of biscuits, bread and cakes. A 6% topline growth in this business is a good sign in these difficult market conditions. With Britannia's focus back on bakery, one can expect further efficiencies going forward. At the current price of Rs 513 the stock trades at 18.4x annualised 1QFY03 earnings, market cap to sales of 1.1x.

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