Varun Beverages Limited (VBL), one of PepsiCo's largest franchisees globally, has released its financial results for the second quarter, demonstrating resilience in the face of adverse weather conditions. The company, known for its extensive beverage portfolio, managed to maintain steady performance despite challenges in its key market.

Financial Highlights

For the quarter, VBL reported:

• Revenue from operations decreased by 2.5% year-on-year to ₹70,173.70 million
• EBITDA increased marginally by 0.4% to ₹19,987.70 million
• EBITDA margin improved by 82 basis points to 28.5%
• Net profit after tax rose by 5.0% to ₹13,254.90 million

Volume and Market Performance

The company faced headwinds in its domestic market:

• Consolidated sales volume declined by 3.0% to 389.70 million cases
• India volumes decreased by 7.1% due to abnormally high unseasonal rainfall
• International volumes grew by 15.1%, partially offsetting the overall decline
• South Africa market showed strong growth of 16.1%

Product Mix and Pricing

VBL maintained a balanced product portfolio:

• Net realization per case increased by 0.5% at the consolidated level

Operational Updates

The company continued to expand its production capabilities:

• Commissioned new production facilities in Prayagraj (UP), Damtal (HP), Buxar (Bihar), and Mendipathar (Meghalaya)
• Varun Beverages Morocco started commercial production of PepsiCo's snack product 'Cheetos'
• Enhanced capacity in South Africa with a new can line in Durban

Strategic Moves

VBL made several strategic decisions to strengthen its position:

• Acquired a 50% stake in Everest Industrial Lanka (Private) Limited, a Sri Lankan visi-cooler manufacturer
• Increased stake in its Zambian subsidiary from 90% to 95%
• Approved a second interim dividend of ₹0.50 per share

Management Commentary

Ravi Jaipuria, Chairman of Varun Beverages, commented on the results: "We delivered a resilient performance during the quarter. In spite of unusually early onset of monsoon rains in the peak summer months in India, we could keep our realizations per case and EBITDA margins intact."

He added, "Although unseasonal rains have impacted performance during the quarter, we have successfully navigated such challenges in the past and emerged stronger. We continue to strengthen our on-ground execution by adding more visi-coolers and ensuring wider product availability across retail touchpoints."

Outlook

Despite the short-term challenges, VBL remains optimistic about its future prospects. With robust capacities now operational, an expanding product portfolio, and a focused distribution network, the company is well-positioned to capture emerging opportunities and drive sustainable, long-term value creation for stakeholders.

As Varun Beverages continues to navigate through market fluctuations and weather-related challenges, its strategic initiatives and international growth are expected to play crucial roles in maintaining its strong market position in the beverage industry.

Varun Beverages Ltd (VBL), one of PepsiCo's largest franchisees globally, announced its financial results for the second quarter and half-year ended June 30, demonstrating resilience in the face of challenging weather conditions in India.

Financial Highlights

• Consolidated revenue from operations decreased by 2.5% year-on-year to ₹70,173.70 million in Q2.
• EBITDA increased marginally by 0.4% to ₹19,987.70 million, with EBITDA margins expanding by 82 basis points to 28.5%.
• Net profit after tax grew by 5.0% to ₹13,254.90 million, driven by operational efficiencies and lower finance costs.

Operational Performance

The company faced headwinds due to abnormally high unseasonal rainfall throughout the quarter in India, leading to a 3.0% decline in consolidated sales volume to 389.7 million cases. However, VBL's international operations helped offset some of this impact:

• India volumes declined by 7.1%
• International volumes grew by 15.1%, with South Africa showing strong growth of 16.1%

International Expansion and Product Diversification

VBL continued to strengthen its international presence and diversify its product portfolio:

• Varun Beverages Morocco commenced commercial production of PepsiCo's snack product 'Cheetos', marking the company's entry into the high-potential snack category.
• In South Africa, the company enhanced capacity by setting up a can line in Durban and is awaiting approval for land acquisition to expand its Boksburg facility.

New Production Facilities

During the first half of the year, VBL commissioned new production facilities at:

• Prayagraj (Uttar Pradesh)
• Damtal (Himachal Pradesh)
• Buxar (Bihar)
• Mendipathar (Meghalaya)

Strategic Investments and Partnerships

• VBL acquired a 50% stake in Everest Industrial Lanka (Private) Limited, a Sri Lankan company engaged in the production and distribution of commercial visi-coolers.
• The company is set to form a joint venture called White Peak Refrigeration Private Limited with Everest International Holdings Limited to manufacture visi-coolers and refrigeration equipment.

Management Commentary

Ravi Jaipuria, Chairman of Varun Beverages, commented on the results: "We delivered a resilient performance during the quarter. In spite of unusually early onset of monsoon rains in the peak summer months in India, we could keep our realizations per case and EBITDA margins intact. Due to growth in international markets supported by strong positive currency movement in Africa territories, the Company ended the quarter with a positive PAT, in spite of 3% decline in consolidated sales volumes."

Dividend Announcement

The Board of Directors approved a second interim dividend of ₹0.50 per equity share, with August 2 set as the record date.

Outlook

Despite the challenges posed by unseasonal rains, VBL remains optimistic about its future prospects. The company continues to strengthen its on-ground execution by adding more visi-coolers and ensuring wider product availability across retail touchpoints. With robust capacities now operational, an expanding product portfolio, and a sharply focused distribution network, VBL is well-positioned to capture emerging opportunities and drive sustainable, long-term value creation for all stakeholders.

As Varun Beverages navigates through temporary setbacks, its strategic initiatives in international markets and product diversification are expected to contribute to its growth trajectory in the coming quarters.