Varun Beverages (VBL) Q4 2017 earnings summary

Executive summary

• CY2017 delivered 3.7% growth in adjusted revenue from operations, 5.0% EBITDA growth and 345.6% PAT growth, despite weak volume conditions in H1; efficiency measures and Ind-AS changes supported profit improvement.

• Operations spanned six countries; India generated 75% of revenue, Nepal and Sri Lanka 14%, and Africa 11%. Domestic franchise coverage expanded to 21 states and 2 Union Territories.

Financial highlights

• Consolidated revenue from operations was ₹45,162.4m, down 0.3% YoY; excluding excise duty, adjusted revenue was ₹40,034m, up 3.7% YoY.

• Consolidated EBITDA rose 5.0% to ₹8,358m; EBITDA margin expanded 30 bps to 20.9%.

• Consolidated PAT increased 345.6% to ₹2,140.6m from ₹480.4m; basic EPS was ₹11.52 vs ₹2.92.

• Sales volume grew 1.1% to 278.8m cases; international volumes rose 5.9% YoY.

Outlook and guidance

• Management expected domestic volume momentum to accelerate, supported by improving conditions and stronger H2 CY2017 volumes; it targeted sustaining EBITDA margin near the 2017 range.

• Strong free cash flow was expected from existing investments as major capex neared completion; debt was expected to normalize by end-H1 CY2018 through internal accruals.

• Priorities include integrating new territories, increasing distribution and penetration, launching products aligned with consumer trends, optimizing production/logistics and repaying debt.