Arisaig-Backed Britannia's Profit May Drop as Wheat, Sugar Prices Increase
Britannia Industries Ltd., India’s biggest cookie maker backed by Arisaig Partners, may report lower profit as commodity prices rise.
Prices of wheat, sugar and dairy products have increased by as much as 20 percent in the past year, Managing Director Vinita Bali said in a telephone interview. “The very irrational and steep rise in commodity prices somehow continues to be unabated,” she said. “The entire profit pool of the industry has come down.”
Commodity inflation has outstripped any price increases the industry may make, she said. The company, which makes bakery products such as cakes, biscuits and bread, posted a 31 percent drop in profit in the three months through June. Wheat prices touched the highest level in almost two years on Aug. 6 on the Chicago Board of Trade, while sugar traded in London climbed to a five-month high on Sept. 2.
Food inflation in India has held close to 10 percent for the last four weeks. Food prices are expected to cool due to better crop yields after this year’s normal monsoon.
Britannia’s sales volumes grew by 20 percent in the first quarter of this year, Bali said. To meet rising demand, the company plans to set up factories in the eastern states of Bihar and Orissa at a cost of about 450 million rupees each. Britannia will also upgrade existing facilities, she said.
Arisaig Partners Asia Pte. owns 1.5 percent of Britannia, according to data compiled by Bloomberg. Billionaire Azim Premji owns 0.3 percent of the company, the data showed.
To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net
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