Varun Beverages posts 26% rise in Q2 net profit; board approves interim dividend, stock split

Varun Beverages clocked a net profit of ₹1,261.83 crore in the quarter ended June 2024, which was 25.5% higher as against the year-ago period, as per a regulatory filing made by the Pepsi bottler on Tuesday, July 30.

Despite strong earnings, shares of the beverage industry player, fell over 6% following the announcement of results as market participants appeared to have taken profits off the table.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 31.8% year-over-year (YoY) to ₹1,991.22 crore. The EBITDA margin improved by 74 basis points (bps) to 27.7% during the quarter, led by higher gross margins.

Gross margins improved by 222 bps to 54.7%. This was driven by timely procurement and storage of PET chips to avail pricing benefits as well as the focus on reducing sugar content and light-weighting of packaging, the company stated.

Meanwhile, consolidated sales volume grew by 28.1% to 40.16 crore cases during the quarter. India volumes grew by 22.9% while international volumes (before BevCo volumes) came in almost flat, primarily on account of volumes in Zimbabwe getting affected due to portfolio transition to zero sugar without affecting profits.

In July, the firm has commenced commercial production of carbonated soft drinks and packaged drinking water at our production facility in Kinshasa, Democratic Republic of Congo.

Board approves interim dividend, stock split

The board of directors of the firm has approved an interim dividend of ₹1.25 per share. The record date to determine the shareholders eligible for the dividend payout has been fixed as August 9, whereas the amount will be paid from August 13 onwards.

The board has also recommended a split of the existing equity shares of the company in the ratio of 2:5 intended at improving the liquidity of the stock that will enable wider participation.

Each equity share having face value of ₹5 will be "sub-divided/split into such number of equity shares having face value of ₹2 each fully paid-up", Varun Beverages said in the regulatory filing. The stock split, however, is subject to the approval of shareholders.

Meanwhile, Ravi Jaipuria, Chairman, Varun Beverages said the company is excited to announce further expansion in its partnership with PepsiCo, having entered into an exclusive snacks franchising appointment to manufacture, distribute, and sell "Simba Munchiez" in Zimbabwe by October 2025 and in Zambia by April 2026.

“This follows our recent announcement to manufacture and package Cheetos in Morocco by May 2025. These agreements complement our existing distribution of PepsiCo’s portfolio, marking another significant step forward in our strong, symbiotic partnership,” he said.

Shares of the company have risen by nearly 27% since the beginning of the year. The stock has gained over 96% in the last one year.