Varun Beverages Q2 Profit Hit By Weak Summer Demand; Dividend Declaration Signals Confidence

By Prashant for PuneriPages.in

When it comes to beating the summer heat, Varun Beverages — the largest bottler for PepsiCo in India — usually sees sales soar. But this time, the script played out a little differently. Despite high expectations from the peak season, the company reported a surprise dip in profit for Q2 of FY25. However, it wasn’t all gloom — Varun Beverages also declared an interim dividend, hinting that the management remains upbeat about the bigger picture.

What Happened in Q2 FY25?

The April to June quarter is when beverage sales typically shoot up, thanks to summer demand. But this year, the unusually wet and cooler summer played spoilsport. Net profit came in at ₹1,036 crore, down 5.5% year-on-year, even though revenue grew by 11.7% to ₹5,977 crore. Operating profit (EBITDA) rose slightly to ₹1,267 crore, but margins dipped due to higher costs and softer volumes.

The Numbers at a Glance:

Revenue: ₹5,977 crore (↑11.7%)
Net Profit: ₹1,036 crore (↓5.5%)
EBITDA: ₹1,267 crore (↑3.7%)
EBITDA Margin: 21.2% (vs. 22.8% last year)
Sales Volume Growth: 6.1%

What Dragged the Performance?

Weather Impact: The cooler-than-usual summer in key markets like North India affected sales of soft drinks.
Input Costs: Rise in packaging and transport costs ate into margins.
International Biz: Though expanding, international operations like Morocco and Zambia saw some pressure.

But There’s a Silver Lining

Here’s what gives hope: despite the dip in profits, Varun Beverages announced an interim dividend of ₹1.25 per share. That’s the company telling investors — “we’ve got this.”

Also, volume growth was still positive, especially in South and East India. And new launches like energy drinks and premium products are helping diversify the portfolio beyond just colas.

What Should Investors Watch Next?

Festive Season Sales: Raksha Bandhan to Diwali will be the next key trigger.
Commodity Prices: Any drop in PET and sugar prices could improve margins.
Geographical Expansion: Growth in African markets could surprise positively.
Premium Product Uptake: If the new premium beverages gain traction, it could boost realizations.

Final Word

This quarter may not have been as fizzy as expected, but Varun Beverages still has a strong grip on the throttle. A 5% profit dip in peak summer isn’t ideal, but it’s not alarming either. The company’s fundamentals remain robust, and its dividend payout signals confidence. As always, smart investors will keep an eye on long-term potential, not just one quarter’s weather.

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