Britannia Industries Q2: Focus is on volume expansion; net profit should increase 11% year over year on unchanged sales

 Britannia Industries Q2: Focus is on volume expansion; net profit should increase 11% year over year on unchanged sales

Britannia anticipates modest development in the dairy and baking industries, although growth in volumes may be challenged by the unorganised sector.

Even with a modest increase in sales, Britannia Industries is expected to record Q2FY24 net profit up 11% year over year, driven mostly by benign material costs.

Averaging four brokerage forecasts, Britannia Industries' fiscal second quarter net profit is anticipated to reach Rs 549 crore. The FMCG, dairy, and cookie firm is anticipated to announce sales for the July-September quarter of Rs 4,474 crore, up less than 1% from the same period last year.

Sequentially, net profit is anticipated to grow by 19.5%, while quarterly sales growth is probably going to be closer to 10.1%.

It is anticipated that in the July–September quarter, Britannia's Earnings Before Interest Tax Depreciation and Amortization (EBITDA) margin would rise by 142 basis points year over year to 17.76 percent.

With the help of an increase in input costs, the company's gross margin is predicted to increase by 300 basis points annually. However, owing to increased personnel costs and other expenditures, the operational profit margin increase would only be 130 basis points year over year, according to brokerage company Sharekhan.

For Britannia, Motilal Oswal projects a three percent volume gain in Q2 FY24.

Demand is still low.

According to analysts, Britannia Industries' demand in the July–September quarterly period has probably remained weak. Prabhudas Liladher, a domestic brokerage business, anticipates late Diwali and competition from unorganized players to control volume growth.

According to a research by JM Financial, the "operating environment continues to grow tough with pricing growth already off the table while demand is still soft."

Wheat and sugar prices are rising.

In the last year, there has been a spike in the price of essential raw commodities like sugar and wheat. On a YoY and QoQ basis, the cost of sugar has gone up by 6% and 4%, respectively. The cost of wheat has increased by 7% year over year and by 6% sequentially.

In June, Britannia Industries raised the pricing of the cheeses in its portfolio by 4% due to the rise in milk costs. Over the last six months, there haven't been any notable price increases in the biscuit category.

Nonetheless, considering the dairy inflation, Britannia had a sharp increase in MRP of around 24% and a decrease in grammage over the previous six months for Milk Bikis. In July, on the other hand, butter prices in Britain were lowered by almost 13 percent.

The firm had previously reported that it was facing competition from unorganised companies in the April-June quarter, which led to price reductions and grammage increases and a less than anticipated increase in profits.

According to Sharekhan, Britannia Industries is closing the gap in market share with the second-place competitor and is concentrating on growing the adjacent categories, such as dairy and baked goods, in order to achieve steady development going forward.