Varun Beverages (VBL) Q4 2018 earnings summary

Executive summary

• FY18 delivered 27.5% net revenue growth, 21.9% volume growth and 40.1% PAT growth, supported by strong India volumes, Zimbabwe growth and acquired territories.

• Expansion plans target a presence in 27 Indian states and 7 Union Territories, raising the share of PepsiCo India beverage volumes handled from 51% to 80%+, subject to approvals.

Financial highlights

• Consolidated net revenue from operations was ₹51,052.55m, up 27.5% YoY; revenue from operations including excise was ₹52,281.27m, up 15.8%.

• Consolidated EBITDA rose 20.4% to ₹10,065.87m; net profit for the year increased 40.1% to ₹2,998.63m.

• Sales volumes increased 21.9% to 340m cases from 278.8m; India organic volume growth was 13.3%.

• Higher-realization products, select SKU price increases and ₹530.8m freight-cost reclassification supported reported value growth of 5.6%.

• Standalone revenue was ₹39,584.91m and PAT ₹3,323.59m, versus ₹35,380.90m and ₹2,355.98m in 2017.

Outlook and guidance

• Management expected historical growth momentum to accelerate, supported by acquisitions, portfolio expansion, under-penetrated territories and end-to-end execution; this was qualitative outlook, not quantified guidance.

• Capacity utilization at peak remained below 70%, allowing volume growth without major near-term capacity additions; the Pathankot facility was expected to start operations in March 2019.

• Growth priorities include strengthening distribution and cooler placement in new territories, market-share gains, non-cola and non-carbonated beverages, operating leverage and cost efficiencies.