How has Britannia managed the cost hikes in the Dec-21 quarter?

You can say that they managed much better than expected, at least on the top line if not on the bottom line. For instance, Britannia reported good top line numbers although the rather vicious combination of input cost inflation and supply chain constraints hit operating profits growth of the company. Sales growth was maintained due to its dominance in the niche food segment. Here is a quick summary of Britannia in financial numbers.

Sales were up 12.93% on a yoy basis in the Dec-21 quarter at Rs.3,575 crore for Britannia Industries. Britannia reported high single-digit growth in volumes in the quarter thanks to its niche presence and leadership in most of the food segments it operates in. Weak rural demand did limit its growth in top line. However, they managed to tweak the product positioning to improve market traction in the food business.

One such example of product position tweaking was the Good Day biscuits being re-launched with the concept of “Multiple smiles per pack”. That managed to maintain customer visibility. As the market leader, Britannia managed to effect price increases across categories, although it was not enough to cover the 20% inflation. Top line sales saw weakening of short term momentum. On a sequential basis, the revenues were down by just -0.90%, showing sequential pressure on the revenues.

Operating profits were down -13.07% at Rs.489.34 crore. This was largely accounted for by higher input costs playing on profits. There was a 20% spike in input cost inflation on a yoy basis and in the midst of tight competition in the foods business, only part of these cost spikes could be passed on to the customers as higher prices. Overall, there was a 22% spike in raw material costs at Rs.1,818 crore in the Dec-21 quarter.

Operating margins fell from 17.78% in Dec-20 quarter to 13.69% in the Dec-21 quarter. Net Profits fell -18.56% yoy at Rs.371.18 crore on weak operating performance and pressure of heavy cost inflation of over 22%. Even the other income was lower yoy. ISCR and DSCR took a hit in the quarter due to lower profit traction. PAT margins fell sharply from 14.40% in the Dec-20 quarter to 10.38% in the Dec-21 quarter.