Cost control propels Britannia net by 93%

Written by fe Bureau | Bangalore | Updated: Aug 13 2013, 08:13am hrs
Britannia Industries on Monday posted a 93% jump in its consolidated net profit for the June quarter to R89.49 crore, sending its stock up by 5.43% at the Bombay Stock Exchange to close at R732. The company attributed the robust numbers to the fall in input costs of wheat and sugar as well as several cost-control measures, such as alternative fuels and freight consolidation.

The company has also announced the expansion of its Jhagadia plant in Gujarat.The Bangalore-headquartered company reported consolidated revenues of R1,551.51 crore, up 14.58% from the R1354.07 crore it reported for the same period last fiscal.

The food major made some organisational changes during the quarter in May, with managing director Vinita Bali turning her focus to the company's international operations and new business growth while COO Varun Berry was asked to lead Britannia's India operations.

Vinita Bali said, Our results are a reflection of our focus on driving consumer off-take and operational efficiencies to generate sustainable and profitable growth. We have also seen a 100-basis point (bps) increase in operating margin. The company has reported an operating margin of 7.7%, compared with 4.7% in the first quarter of last year, despite an increase in brand investment, it said in a release.

The results have taken analysts by surprise, with almost 100% yearly growth in gross margins and lower expenses. "The street was more enthused since the Ebitda margin expanded yearly by 300 bps despite a 90-bps increase in spending on advertisements and a 40-bps increase in employee costs. Ebitda margin at 8.3% was way above expectations," research firm Motilal Oswal said in an analyst note, reiterating its buy rating on the company.

Britannia operates in two business segments: bakery and dairy products.