Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Patanjali Foods Ltd (BOM:500368, Financial) reported a healthy quarterly performance with double-digit margin growth at the EBITDA and PAT levels.
- The company declared an interim dividend of INR 8 per equity share, reflecting strong financial health.
- The food and FMCG segment achieved a revenue of INR 2,303 crore with an EBITDA margin of 10.2%, indicating robust performance.
- The company expanded its cultivated land for oil palm plantation by over 5,200 hectares, aiming to cover 60% of its requirement in the next five years.
- Patanjali Foods Ltd (BOM:500368) is actively engaging in premiumization and expanding its presence in e-commerce and quick commerce channels, targeting 20% of its FMCG sales from these channels.
Negative Points
- The company faced challenges due to erratic and uneven rainfall, impacting FMCG volumes and consumer offtake.
- There was pressure on raw material prices, with wheat prices increasing by 9-10% and pulses also seeing upward price movement.
- The edible oil market experienced a 30% increase in domestic crude and refined oil prices, affecting cost structures.
- The biscuit segment's margins declined due to higher wheat and edible oil prices, impacting profitability.
- There is a buildup of inventory in the system, particularly in general trade, which could pose challenges in managing supply chain efficiency.
Q & A Highlights
Q: In light of the 30% inflation in the oil business, is there any inventory gain realized this quarter or expected in the next? What price increases have been taken, and what are the implications for margins?
A: The customs duty increase benefited us, but the gain was limited to about 10-12 days in the second quarter. We expect to carry forward the momentum into the next quarter. Prices have increased by 8-10% internationally, and our price increases are in line with that. We anticipate maintaining a margin of 2-4% going forward.
Q: Can you provide revenue and margin details for the food division, including staples, non-staples, biscuits, Nutria, and nutraceuticals?
A: The FMCG segment reported a total revenue of 2,304 crore with an EBITDA margin of 10%. Indian ethnic foods achieved a revenue of 621 crore with a 21% margin. Consumer staples recorded 1,032 crore in revenue with a 1% margin. Biscuits had a revenue of 439 crore with a 9% margin. Nutria and nutraceuticals reported revenues of 188 crore and 23 crore, respectively, with margins of 23% and 44%.
Q: What is the impact of urban and rural market dynamics on your business, and how are you addressing inventory challenges?
A: Urban markets show some stress, while rural demand remains robust. We are seeing inventory build-up in general trade, and we are actively working on promotions to address this. Typically, we maintain about 30 days of inventory across the system.
Q: How is Patanjali Foods adapting to the rise of e-commerce and quick commerce channels?
A: E-commerce and quick commerce currently account for about 4% of our FMCG sales, with modern trade contributing 6%. We aim to increase this to 16-20% of our FMCG portfolio. We are enhancing our strategy and presence on social media to drive sales through these channels.
Q: What are the company's plans for premiumization and product innovation?
A: We are focusing on premiumization, especially in categories like biscuits and nuts, with contemporary packaging and branding. We have onboarded brand ambassadors to enhance our product appeal. Our premium portfolio currently accounts for 15-18% of our business, and we aim to grow this segment steadily.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
