Earnings Review: Volatile rupee drags dn Eveready Oct-Dec PAT by 77%

Informist, Tuesday, Feb 7, 2023


By Avishek Rakshit


KOLKATA – Currency volatility and continuing inflation in raw materials dragged down the net profit of Eveready Industries India Ltd for the December quarter. The country's largest dry-cell battery maker posted a massive 77.1% fall in its net profit at 54.4 mln rupees.


While previous price hikes undertaken by the company in the financial year ending March led to a marginal 1.4% growth in its topline at 3.3 bln rupees in Oct-Dec, the difference between revenue and costs increased on year which led to the sharp dip in the company's profit.


Raw material costs shot up nearly 27% on year to 1.6 bln rupees owing to currency volatility, and operational deleveraging pushed up costs by another 45.7% year-on-year to 624.5 mln rupees.


Lead and other raw material prices started cooling off in the immediate aftermath of the monsoon season, but a depreciating rupee led to a substantial rise in cost of raw material imports. It directly affected the company's profit and margins in the dry-cell portfolio, which accounts for over 65% of Eveready's revenues.


The growth target was also consciously moderated during the December quarter to help it come up with a new route-to-market programme as an initiative for long term improvement, a company official told Informist. 


After the Burmans of Dabur acquired Eveready officially in July 2022, the company has been stressing on increasing the reach further, while also bridging the product portfolio gap. 


The revenue performance, according to the company official, was driven by premiumisation of its product portfolio and focussed on marketing and branding initiatives. 


Market share of Eveready, which has been facing stagnated growth in batteries since the past several years, rose only marginally by 170 basis points in Oct-Dec. As a result, amid stagnant revenue and mounting costs, Eveready found itself incapable to holding onto its profits or margins. Operating margins, primarily attributed to the depreciating rupee and Eveready's increasing marketing and promotional spends, fell sharply by 519 basis points on year to 7.3%.


Despite commanding over 50% market share in the country's dry-cell battery space, Eveready has been missing some key products like rechargeable batteries and rechargeable flashlights, which is limiting its growth prospects, sources told Informist.


Moreover, the company faced substantial impact on demand for its products from the rural markets which drive volume growth.


A stagnated portfolio and lack of innovation over the past few years resulted in Eveready's revenue from the battery business to stagnate and the company trying out various diversification routes like lighting and luminaires, and appliances. At one point, under its former owners, the Khaitans of Williamson Magor group, it even tested venturing into candy distribution, although it didn't work out finally.


Today, shares of Eveready closed flat at 327.1 rupees on the National Stock Exchange.




Edited by Tanima Banerjee



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