Britannia Industries dips 5% on margin disappointment in Q2

The company said its operating margin contracted by 425 basis points (bps) to 14.09 per cent in Q2FY22 from 18.34 per cent in Q2FY21

Shares of Britannia Industries dipped 5 per cent to Rs 3,536.60 on the BSE in Tuesday’s intra-day trade after the company reported 23 per cent year-on-year (YoY) decline in its consolidated net profit at Rs 381.84 crore, due to higher raw material cost. The packaged foods company had reported a profit of Rs 495.20 crore in a year ago quarter (Q2FY21). On quarter-on-quarter (QoQ) basis, net profit down 1.4 per cent from Rs 387.10 crore in Q1FY22.

The company said its operating margin contracted by 425 basis points (bp) to 14.09 per cent in Q2FY22 from 18.34 per cent in Q2FY21. Operating margin stood at 14.84 per cent in Q1FY22.

At 09:26 am; the stock was trading 4 per cent lower at Rs 3,568, as compared to 0.07 per cent fall in the S&P BSE Sensex. With today’s fall, the stock has corrected 15 per cent from its 52-week high of Rs 4,152 touched on September 14, 2021. The stock had hit a 52-week low of Rs 3,317.90 on February 22, 2021.

In Q2FY22, Britannia’s consolidated revenue from operations was up 5.5 per cent at Rs 3,607 crore from Rs 3,419 crore in the corresponding quarter of previous fiscal. Consolidated gross margin contracted by 500 bp YoY to 37.5 per cent.

Higher staff cost (+30bp YoY), but lower other expenses (-110bp YoY) meant that EBITDA margin contracted by 430bp YoY to 15.5 per cent against estimate of 16.7 per cent, Motilal Oswal Securities said in a result update.

The management said during the quarter, the impact of the second wave of Covid-19 started receding, and the economic activity started picking up. However, inflationary trends remained rampant around the globe, across sectors.

On the cost front, the global economy continued to witness supply led constraints across various input materials fuelling inflation. While we have been able to partially mitigate the impact through strategic forward covers and accelerated cost efficiency programs, we have also initiated necessary price increases across the portfolio all of which will address the cost push and normalise profitability, the management said.