Britannia shares fall as inflation eats into sales and profit

    Britannia shares fall as inflation eats into sales and profit
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    By CNBCTV18.com  IST (Updated)

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    Britannia share price: The FMCG major's stock made a U-turn following a positive start on Friday, a day after its quarterly performance fell short of analysts' expectations.

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    Britannia shares gave up initial gains in a volatile session on Friday, a day after the FMCG major reported a quarterly performance that fell short of Street estimates. Steep inflation in raw material — thanks to a surge in commodity rates — and a contraction in domestic sales volumes hurt its profitability.
    The Britannia stock declined more than two percent from the highest level of the day, slipping to as low as Rs 3,742 apiece on BSE.
    Its net profit for the April-June period fell 13.2 percent to Rs 336 crore compared with the corresponding period a year ago, according to a regulatory filing.
    Britannia — which owns brands such as Good Day, NutriChoice, Marie Gold, Tiger and Tiffin Fun — managed an 8.7 percent year-on-year increase in revenue, on account of a series of price hikes, though a fall of two percent in domestic sales volumes played spoilsport.
    Analysts in a CNBC-TV18 poll had estimated Britannia's domestic volumes to rise up to two percent in the three-month period.
    The overall FMCG sector is reeling against margin pressure on account of surging input costs.
    The management said the company has been delivering consistent revenue growths in a challenging economic environment, reflecting its execution strength and market strategy as evident in its consistent market share gain over the last 36 quarters.
    Britannia Managing Director Varun Berry said global factors continued to impact the economy, leading to a surge in inflation during the three-month period.
    The firm's EBITDA margin — or the amount by which a business's operating revenue exceeds its costs — fell by 280 basis points on year to 13.5 percent in the three-month period. Analysts in the CNBC-TV18 poll had estimated the margin to come in at 15.4 percent.
    Independent market expert Ambareesh Baliga said Britannia did take price hikes but the challenge remains in the form of high input costs.
    "Their input prices started to come down in the second half of the quarter. I think the full benefit of that will be felt in the second quarter (of the year ending March 2023)," he told CNBC-TV18.
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