Britannia plans to take 'capex break' amid slowdown in urban demand

Senior executives of the company said they would be cautious on capital expenditure because growth in volumes remained on a slow burn, hurt by a slowdown in urban demand

Britannia, the manufacturer of biscuit brands such as Bourbon and Pure Magic, is planning to halt capital expenditure next financial year even as it has announced increasing prices of its products.

  Senior executives of the firm said they would be cautious on capital expenditure because growth in volumes remained on a slow burn, hurt by a slowdown in urban demand. The firm’s capital expenditure was Rs 1,142 crore in FY23 and Rs 412 crore in FY24.

  “We are taking a capex break,” said Vice-Chairman and Managing Director Varun Berry on Friday in a call with analysts. “It (capital expenditure) will be as low as possible, probably Rs 150-200 crore. Unless there is an increase in volumes, we will not need it.”  

 Berry said the company had three new plants — one each in Uttar Pradesh, Bihar, and Tamil Nadu.

 

Will raise product prices by about 6.5 per cent over the next six months 

  Players in fast-moving consumer goods (FMCG) across the country have been adversely affected by tepid demand. Consumers, especially in cities, continue to cut spending owing to high inflation and modest salary increases.

  Rural India, which accounts for over a third of consumer goods sales, has, however, outperformed urban centres for the past one year.

  The firm said it would raise prices of its products by about 6.5 per cent over the next six months to offset the impact of the high cost of commodities.

  Berry added an 11 per cent increase in commodity prices such as wheat, palm oil, and cocoa over the past one year had forced the company to do this. 

  “Inflation is not going away and the industry is facing the challenge, more so the local players. We expected prices to normalise but they have not,” he said.

  While volumes will take a hit, Britannia is ready to take risks, Berry added.

  The Bengaluru-based company will offset another 2 per cent with cost efficiencies and the rest through other measures.

Hindustan Unilever raised prices in the December quarter, warning of more to come, while Nestle too cautioned against such steps in its coffee business.

  Demand for packaged consumer goods rose about 11 per cent in the third quarter ended December, as against the same period a year earlier due to smaller packs, lower grammage, and price increases, market researcher NielsenIQ India said earlier this week. 

Britannia reported a 4.8 per cent sequential jump in its December-quarter consolidated net profit to Rs 582 crore.

  Consolidated sales were up 6.5 per cent to Rs 4,463 crore.