Varun Beverages Q3 Results: Consolidated volumes grow 2.4%; gross margins improve

Varun Beverages Ltd., one of the largest bottling partners of food and beverage giant PepsiCo Ltd. announced its September quarter results on Wednesday, October 29. This is the third quarter for Varun Beverages as the company reports earnings in a calendar year format.

Consolidated sales volume grew by 2.4% to 273.8 million cases in the third quarter from 267.5 million cases in the same quarter last year, despite heavy rainfall continuing across India throughout the quarter.

India volumes were almost flat, and international volumes grew by 9.0%, led by a strong performance in South Africa.

Gross margins improved by 119 basis points at 56.7% in Q3 due to increased mix of water in international markets. Also, in the international markets, there is a shifting of expenses from purchase of raw materials to employee cost, power and fuel and other manufacturing overheads because of increased in-house backward integration initiatives.

Revenue for the quarter rose by 2% from the year-ago quarter to ₹4,896.7 crore.

Net profit increased by 20% to ₹742 crore from ₹619 crore during the same period last year. The figure was driven by lower finance cost and higher other income which includes interest on deposits in India and favourable currency movement in the international territories.

Varun Beverages' Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) came almost flat at ₹1,150 crore. Margin narrowed by 60 basis points to 23.4% from 24% during the same quarter last year.

Varun Beverages has changed the Object Clause of its MoA. It will also enter the Alcobev business. The company announced partnership for Carlsberg distribution in South Africa.

"We are incorporating a wholly-owned subsidiary in Kenya under Varun Beverages to carry on the business of manufacturing, distribution and selling of beverages. We are also diversifying our product offerings and certain African subsidiaries of VBL shall test market beer in their territories through an exclusive Distribution Agreement with Carlsberg Breweries A/S for their Carlsberg brand," said Ravi Jaipuria, Chairman of Varun Beverages.

Shares of Varun Beverages are at day’s high post the earnings announcement, currently trading 3.27% higher at ₹469.