It gives me immense pleasure to place before you the 27th Annual Report ofthe Company.
We started the year on a healthy note supported by a steady macro environment asconsumption was almost nearing normalcy following the nationwide lockdown in 2020. Thisenabled us to deliver a healthy performance in the first quarter of 2021. However thedisruptive second wave of COVID-19 infections in the country resulted in localized microlockdowns and restrictions in the months of April and May. With the period of March toMay being a key season for the Company's product portfolio these disruptions moderatedour domestic business performance. Encouragingly with the learnings from 2020 the teamhad all the necessary protocols in place to handle and mitigate the business impact to alarge extent. As lockdowns and curbs started easing from June onwards we witnessed astrong recovery in demand that brought back the growth momentum. Improved offtake acrossour international territories further aided growth during the year under review.
Against this backdrop Varun Beverages Limited (VBL) delivered a strong and resilientperformance delivering a topline growth of 37% in CY21. Our international territoriesalso registered an encouraging performance despite the disruption. We continue to sustainthe cost- optimization measures that we had undertaken during the pandemic period. Despitea decline in our gross margins due to higher pet prices our cost optimization measures incombination with higher operating leverage on the back of strong volume growth hastranslated to enhanced operating performance in 2021. We are further encouraged that evenin a seasonally soft quarter the Company reported profits for the first time ever in Q4of the year on account of better business efficiencies cost rationalization strategieslower financing cost and healthy volume recovery in the international territories.
NEW UPCOMING PLANTS AT BIHAR AND JAMMU & KASHMIR
During the year as a key step towards our sustainability objectives the Board ofDirectors approved to set up a new plant for the manufacturing of plastic preforms andplastic closures at Jammu & Kashmir that will help us further improve our backwardintegration. Additionally the Company will also be setting up a new plant formanufacturing of carbonated soft drinks juice-based drinks and packaged drinking waterat Bihar. This move will enable us to grow our presence closer to our customers increasepenetration and garner a higher market share. We believe it is a high potential marketthat offers long-term sustainable growth opportunities.
INCORPORATION OF A NEW COMPANY 'VARUN BEVERAGES RDC SAS' IN DEMOCRATIC REPUBLIC OFCONGO
During the year the Company incorporated a new company namely 'Varun Beverages RDCSAS' in the Democratic Republic of Congo (DRC) in Africa. This move is aimed at initiallyimporting finished products (carbonated and non-carbonated beverages) from Morocco andZambia and distributing them in DRC to test and establish the market before setting up amanufacturing facility locally in due course of time.
DIVIDEND & BONUS ISSUE
We operate our business in a sustainable way so as to benefit all our stakeholders. Animportant component of delivering value to our shareholders and earning their trust overthe long term is returning capital in a consistent and transparent way. Therefore theCompany's Board of Directors agreed to formalize a dividend strategy with the Company'slisting in November 2016. It has been consistently declaring dividends since its listing.
In line with the guidelines of this dividend policy the Board of Directors haverecommended an interim dividend of Rs.2.50 per share during the year resulting in netcash outflow of Rs.1082.6 million.
In addition to this the Board proposed and approved a Bonus issue of equity shares inthe proportion of 1 equity share for each of the 2 equity shares held by eligibleshareholders.
MESSAGE TO STAKEHOLDERS
We have delivered an encouraging set of results during the year despite a softoperating environment due to the pandemic- induced lockdowns and restrictions during thepeak season. We have been able to drive this strong performance on the back of ourend-to-end execution capabilities and presence across the entire beverage value chain.During the year we strengthened our distribution and reach fortified our productportfolio with new launches and improved market share across existing territories allthis while also managing our costs effectively and maintaining the strength of our balancesheet.
As we enter CY22 we are on a strong footing. The third wave of COVID-19 has not hadany significant impact on our business. We are seeing a healthy pick-up in the overalleconomic activity across the country which is translating into an improved consumptiontrend. Considering the higher vaccination drives and supportive fundamentals we expectthe demand momentum to keep strengthening in the coming months. On the whole we continueto undertake several initiatives to sustain and enhance the pace of our growth and tofurther strengthen our market position in the beverage industry.
VOTE OF THANKS I take this opportunity to express my gratitude to all our stakeholdersthat supported us through the challenges and firmly stood with us amidst the adversity. Ialso extend my sincere thanks to the Board for its whole-hearted guidance and support. Wewill continue to value the guidance and support of all our stakeholders as we emergestronger from this global crisis and move ahead to an even brighter future.