JFM CY24 results show a strong improvement in margins with OPM and net margins at all time high and a big jump in gross margin over the last year. Sales growth was lower than the recent past at 11 % but with large capex and inorganic growth initiatives coming online, growth can be expected to pick up in the coming quarters. Meanwhile, the management defined “3 growth engines” in the concall, all of which pointed to international markets. Some highlights from the concall:
- Three Growth Engines:
- South Africa’s combined territory with Lesotho, Eswatini, Namibia, Botswana, Mozambique and Madagascar.
- Entry into new territory of DRC where PepsiCo is not present at all as of now, the commercial production here from our new state-of-the-art greenfield plant is expected to start from the next quarter.
- Entry into snack food production by May 2025 in Morocco.
-
In JFM CY24, volume growth was 7.2 % and net realization per case growth of 3.5 %. International markets command a higher realization per case. Volume growth internationally is 21.9 % led by Zimbabwe and Morocco.
-
DRC: Greenfield plant in DRC is expected to start by the next quarter. DRC is more than 100 million population and warm climate. We have put 2 large lines and our capacity is about 35 million cases
-
Morocco: Company has entered into an exclusive agreement to manufacture and package Cheetos into Morocco, by May 2025. In terms of return on capital, food business is as good or better than the beverage business because the capex is much lower.
-
South Africa: BevCo has 5 plants. South Africa is close to 1 billion case market, with one of the highest per capita consumption rates of about 250 servings per person. However, PepsiCo’s market share is very meagre at 1.8 %. This presents us with a huge upside for growth
-
Low sugar: 46 % of consolidated sales volumes come from low sugar or no sugar products. South Africa will significantly add up to this achievement, with approximately 90 % of the portfolio being comprised of low or no sugar products in that country. Another country following suit is Morocco. (This is very heartening to note, given that screws are gradually tightening around high sugar products in India – see this and this, for example)
-
Debt: Last year same quarter, the average cost of borrowing was 7.7 %, which this year is 8 %. Most of the capex is already done, now the focus is on repaying the debt. In the past, any time for the last 3-4 years, you must have noticed that our Debt-to-EBITDA is around 1 – 1.25 and Debt to Equity is 0.5 – 0.7. After the season ends in 1 or 2 months, these ratios will be at the same level. By the end of the year 2024, it will be our endeavor to reach the 31st December 2023 debt position.
-
Capex: We measure depreciation as a percentage of revenue and in the long run it has been coming down. Since most of the capex is already done, in the next few quarters EBITDA coming from the 3 new plants in India (Odisha, UP, Maharashtra) and from 5 plants of South Africa should start contributing and DRC should also start contributing.
-
The total number of plants with backward integration facilities now is 13 (not sure what this comprises of – is it PET bottles, caps, water or something else)
-
One analyst noted that Campa Cola in FY24 has done around Rs. 400 crore sales.
(Disc.: Invested)
| Subscribe To Our Free Newsletter |
