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.

Varun Beverages Limited (VBL), a key player in the beverage industry and one of the largest franchisees of PepsiCo worldwide, has reported a mixed bag of results for the second quarter, along with strategic moves to expand its manufacturing capabilities.

Volume Decline in India

VBL experienced a 7.1% drop in India volumes during Q2, according to its investor presentation. The company's sales volume in India decreased to 390 million units from 402 million units in the same quarter of the previous year, representing a 3% year-over-year decline. This decline was primarily attributed to abnormally high unseasonal rainfall throughout the quarter in India.

Financial Performance

Despite the volume decline, VBL managed to deliver a resilient financial performance:

• Revenue from operations decreased by 2.5% year-over-year to Rs. 70,173.70 million.
• EBITDA increased marginally by 0.4% to Rs. 19,987.70 million, with EBITDA margins improving by 82 basis points to 28.5%.
• Net profit after tax (PAT) grew by 5.0% to Rs. 13,254.90 million, driven by operational efficiencies and lower finance costs.

International Market Growth

While India volumes declined, VBL's international business showed strong growth:

• International volumes grew by 15.1%, with South Africa growing at 16.1%.
• Net realization per case improved by 6.6% in international markets.

Joint Venture for Visi-Cooler Manufacturing

In a strategic move, VBL announced the formation of an equal joint venture with Everest International Holdings Limited to establish White Peak Refrigeration Private Limited. This new entity will manufacture visi-coolers and other refrigeration equipment in India. The joint venture will have a paid-up share capital of Rs. 42.50 crore, with both VBL and Everest International holding 50% each.

Expansion and New Ventures

Varun Beverages continues to focus on growth and diversification:

• The company's Morocco subsidiary commenced commercial production of PepsiCo's snack product 'Cheetos', marking its entry into the snacks category.
• VBL enhanced its production capacity in South Africa by setting up a can line in Durban.
• The company is awaiting approval from the Competition Commission of South Africa for a land parcel purchase to further expand capacity and backward integration in Boksburg.

Management Commentary

Ravi Jaipuria, Chairman of Varun Beverages Limited, 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."

Dividend Announcement

The Board of Directors has approved a second interim dividend of Rs. 0.50 per share, resulting in a total cash outflow of approximately Rs. 1,691.00 million.

VBL remains optimistic about its future prospects, citing robust capacities, an expanding product portfolio, and a focused distribution network as key factors positioning the company to capture emerging opportunities and drive long-term value creation for stakeholders.