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Varun Beverages soars after strong Q1 performance; board OKs 1:2 bonus issue

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Varun Beverages jumped 6% to Rs 1008.35 after the company's consolidated net profit increased by 127.7% to Rs 136.76 crore in Q1 2021 as against Rs 60.06 crore in Q1 2020.

The growth in profitability was driven by higher revenue, improvement in margins, reduced finance cost and higher profitability from the company's international operations.

Net revenue from operations rose 33.7% year-on-year (YoY) to Rs 2,240.89 crore. The company witnessed robust consolidated organic volume growth of 24.7% in Q1CY2021 over Q1CY2019 leading to a 2yr CAGR of 11.7%.

Total sales volume grew by 32.8% to 15.1 crore cases in Q1 CY2021 from 11.4 crore cases in Q1 CY2020 as the business recovered during the quarter and lower base of Q1 CY2020 because of lockdown measures in the latter part of March 2020.

Realization per case improved marginally by 0.6% to Rs 148 in Q1 CY2021 which was led by change in product mix with higher contribution from CSD and Juice compared to same period last year.

CSD constituted 70.0%, juice constituted 7.2% and packaged drinking water constituted 22.8% of total sales volumes in Q1 CY2021.

EBITDA increased by 40.7% to Rs 381.62 crore in Q1 2021 compared with Rs 271.16 crore in Q1 2020. EBITDA margin improved by 86 bps to 17.0% in Q1 CY2021 from 16.2% in Q1 CY2020 because of sustainable cost optimization measures that were implemented last year.

Finance cost reduced by 33.4% to Rs. 57.94 million due to repayment of debt as well as lower average cost of borrowing.

Further, the company's board has recommended a bonus issue of one equity share for every two equity shares held by shareholders of the company (1:2) as on the record date.

Commenting on the performance for Q1 2021, Ravi Jaipuria, chairman, Varun Beverages, said: "We have started the year 2021 on a healthy note delivering progressive performance across parameters in Q1. The macro-environment in the quarter was largely supportive as consumption was almost nearing a sense of normalcy. This resulted in a healthy volume growth of approximately 34% YoY for our India business. The growth momentum continued in our international territories registering approximately 26% YoY volume growth during the quarter.

From a demand standpoint, while we saw a notable recovery in the domestic markets in Q1, the environment has evolved now with the onset of the second wave of Covid infections in the country. We are now witnessing more localized, micro lockdowns and restrictions being imposed rather than a nation-wide lockdown witnessed last year. The situation is being addressed by wider vaccination drives being carried out across the nation, which we expect will restore normalcy sooner than later.

Notwithstanding short-term non-linearity in business, we remain confident of the medium to longer-term outlook of the business. We expect that once things stabilize during the current year, we should be able to swiftly bounce back."

Varun Beverages is a key player in beverage industry and one of the largest franchisee of PepsiCo in the world (outside USA). The company produces and distributes a wide range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo. VBL has been granted franchises for various PepsiCo products across 27 States and 7 Union Territories in India along with franchise for territories of Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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First Published: Mon, May 03 2021. 12:10 IST