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Britannia: Subdued performance - Views on News from Equitymaster
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Britannia: Subdued performance
Oct 30, 2009

Performance summary
  • Topline for Britannia during the September 2009 quarter grew by a subdued 2% YoY.
  • Operating (EBITDA) margins for the company increased by 0.2% to 9% during 2QFY10. This lacklustre performance is due to heavy investment in brand building.
  • Net margins grew by 0.5% to stand at 6.8% during the quarter. This is on the back of a subdued sales performance and expenses incurred in brand building.
  • Net margins for 1HFY10 grew by 0.6% to end at 6.7%. This increase was helped by higher other income.


Standalone Financial snapshot
(Rs m) 2QFY09 2QFY10 % change 1HFY09 1HFY10 % change
Net Sales 8,462 8,627 2.0% 15,414 15,966 3.6%
Expenditure 7,715 7,848 1.7% 14,071 14,561 3.5%
Operating profit (EBDITA) 747 780 4.4% 1,343 1,405 4.7%
EBDITA margin (%) 8.8% 9.0%   8.7% 8.8%  
Other income 91 84 -7.4% 151 211 39.1%
Interest 44 9 -80.1% 80 17 -78.7%
Depreciation 82 94 14.6% 161 185 14.8%
Profit before tax 712 762 6.9% 1,254 1,414 12.8%
Exceptional items 64 70 9.7% 119 140 17.2%
Tax 116 101 -12.5% 198 210 6.2%
Profit after tax/(loss) 533 591 10.8% 936 1,064 13.7%
Net profit margin (%) 6.3% 6.8%   6.1% 6.7%  
No. of shares (m) 23.9 23.9   23.9 23.9  
Diluted earnings per share (Rs)*         80.8  
Price to earnings ratio (x)*         21.2  
* On a 12-month trailing basis

What has driven growth in 2QFY10?
  • While the sales during the quarter are subdued, they come off on a high base with 28% YoY growth in sales in 2QFY09. The company launched new products like Britannia ‘Top’ NutriChoice Nature Spice Cracker and relaunched brands like MarieGold. The company also launched new gift packs for the festival season including eggless fruitcake.

  • EDITDA margin for the company grew by 4% aided by fall in raw material costs during the quarter which fell by 1% YoY to 60.1%. The margins were however compressed due to an increase of 27.4% in advertisement costs

  • Profits for the company grew by 11% YoY on the back of lower tax expense. The effective tax rate was 13% during the quarter aided by the shift of premier products manufacturing to tax exempt zones.

What to expect?
At the price of Rs.1,713, the stock is trading at 13.7 times our estimated FY12 earnings. The company has not done as well as our estimates. However, going forward we expect the company’s sales to pick up and receive benefits from its international and dairy businesses. We are following the company and will update our analysis when we get more visibility on the scale up of the company’s new businesses.

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