Pepsi India bottler Varun Beverages posts profit growth on steady volumes

BENGALURU, Aug 3 (Reuters) - Pepsi India bottler Varun Beverages (VARB.NS) on Thursday reported a 26.2% jump in its second-quarter profit, underpinned by improved product mix, a slide in input costs and higher volume growth.

The company, which has been making and bottling PepsiCo-branded (PEP.O) drinks for three decades, posted a consolidated net profit of 9.94 billion rupees ($120.22 million) for the reported quarter ended June 30, compared with 7.87 billion rupees a year earlier.

Gurugram-based Varun Beverages, whose operations span six countries, is PepsiCos No.2 franchisee outside the United States and packages and distributes beverages under Pepsi, Mirinda and Tropicana labels.

The company, which also sells Aquafina packaged bottled water, said its consolidated revenue from operations grew 13.60% to 57 billion rupees year-on-year.

Earnings before interest, taxes, depreciation and amortisation (EBITDA), as calculated by Reuters, rose 20.78% to 15.11 billion rupees year-on-year, as sales growth helped offset subdued volumes in domestic markets due to unseasonal rainfall in North India.

Net realisation, the difference between overall sales value and cost of sales, increased 8.3% year-on-year on superior product mix, and drove EBITDA margin expansion to 26.50% in the June quarter from 24.93%.

Crude prices fell 6.10% during the quarter, and led to a 4.1% slide in input costs. Still, total expenses edged higher due to inventory costs that quadrupled during the quarter.

“We remain optimistic about our full-year performance,” Chairman Ravi Jaipuria said in a statement, and termed the June-quarter results “a resilient performance despite soft demand environment due to unseasonal rains”.

The company approved an interim dividend of 1.25 rupees per share.

Analysts anticipate sustained earnings growth in the coming quarters, driven by the companys recent entry into value-added dairy, sports drinks segments and efforts to increase capacity in these high-margin segments.

Shares of Varun Beverages rose as much as 2.96% to 832 rupees.

Including sessions gains, the stock climbed 24.93% so far in 2023, compared with an 18.35% uptick in the fast-moving consumer goods index (.NIFTYFMCG).

($1 = 82.6790 Indian rupees)