Britannia Industries plunges 5% on disappointed second quarter margins

Britannia Industries shares plunged 5% to Rs 3,536.60 on BSE in intraday trading on Tuesday after the company reported a 23% year-on-year decline in its consolidated net profit to 381, Rs 84 crore, due to higher raw material cost prices. The packaged food company reported a profit of Rs 495.20 crore in the quarter of last year (T2FY21). On a quarterly basis (QoQ), net profit was down 1.4% from Rs 387.10 crore in Q1FY22.

The company said its operating margin contracted 425 basis points (bps) to 14.09% in T2FY22 from 18.34% in T2FY21. The operating margin was 14.84% in the first quarter of fiscal 22.

at 9:26 a.m. the stock was trading down 4% to Rs 3,568, compared to a 0.07% decline for the S&P BSE Sensex. With today’s fall, the stock corrected 15% from its 52 week high of Rs 4,152 reached on September 14, 2021. The stock had hit a 52 week low of Rs 3 317.90 on February 22, 2021.

In the second quarter of fiscal 22, Britannia’s consolidated operating income increased 5.5% to Rs 3,607 crore, compared to Rs 3,419 crore in the same quarter last year. Consolidated gross margin contracted 500 bps year-on-year to 37.5%.

Higher personnel costs (+30 bps yoy), but lower other expenses (-110 bps yoy) meant that the EBITDA margin contracted 430 bps yoy to 15.5% against a estimate of 16.7%, Motilal Oswal Securities said in a results update.

Management said that during the quarter, the impact of the second wave of Covid-19 started to recede and economic activity started to recover. However, inflationary trends remained endemic all over the world, in all sectors.

On the cost side, the global economy continued to face supply constraints for various inputs, fueling inflation. While we were able to partially mitigate the impact through strategic term hedges and accelerated profitability programs, we have also initiated the necessary price increases across the portfolio, which will help meet to push costs and normalize profitability, said management.

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