New Delhi, Nov 4: A poor show by Parry's Confectionery Limited in the first-half of the current fiscal has disappointed marketmen. On Wednesday, the stock hit a two-year low of Rs 102 on the National Stock Exchange. The company has incurred a net loss of Rs 4.53 crore in the first-half of the current fiscal compared with a net profit of Rs 3.03 crore in the corresponding period last year. The loss is because of the non-inclusion of Cocoa Products & Beverages' financials and the change in accounting policies of the inventory valuations. Besides, the competition in the sugar-boiled confectionery market seems to have finally caught up with the company. With Cadbury and Nestle intensifying their presence in the sector, tough times lie ahead for the Chennai-based Parrys Confectionery.On NSE (where the company is listed), the stock has been on a downslide ever since the company announced it disappointing financial results for the first half. At present, the stock is quoting at Rs 104, down from the October 25 level of Rs 130.4. The scrip has been touching a new low every day. Market sources say the scrip is likely to fall further. However, analysts feel the strong backing of a professional group like Murugappa and a good reserves position of Rs 62 crore should see the company sail through the tough times.
The company focus on the export markets should pay well in the times to come. The loss in the second-quarter at Rs 2.14 crore is lower than the Rs 2.39 crore loss reported in the first-quarter of the current fiscal. The company has already started strengthening the distribution system by monitoring secondary sales more closely. The company has taken initiatives to review, restructure and support its distribution network in the country.
Parrys Confectionery is a dominant player inthe sugar-boiled confectionery sector with 28 per cent market share. Its brands include Coffee Bite, Lacto King and Coconut Punch in its portfolio. The nature of the business makes for steady cash-flows and given its strong backward linkages with suppliers and integrated facilities, the company's working-capital management has been good.
In the current fiscal, the company has adopted a policy of giving its whole-sale dealers stock on credit, which has increased the working capital requirements. This led to an increase in interest cost, which increased from Rs 1.58 crore to Rs 2.19 crore.
Parry's has entered into alliances to widen its distribution reach in South Africa and the Saarc region and beefed up its domestic distribution network. In the last fiscal, the company expanded its production line in Tamil Nadu, set up a new toffee line and made investments in two joint ventures - with Chupa Chups of Spain and Huhmataki Oy Leaf, Finland.
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