Britannia Industries
BSE: 500825 | NSE: BRITANNIA | ISIN: INE216A01014 | Food Processing
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Directors Report | Year End : Mar '08 |
The Directors present their Annual Report together with the Statement
of Accounts for the year ended March 31, 2008.
1. FINANCIAL RESULTS
Rs. Mn
Particulars Year Year
ended 31st ended 31st
March 08 March 07
Gross Turnover and Other 26,679 23,487
Income
Profit before Finance Cost, 2,820 1,603
Depreciation & amortisation
and Exceptional items
Finance Cost 97 89
Profit before Depreciation 2,723 1,514
and Exceptional Items
Depreciation and 291 253
Amortisation
Exceptional items 109 77
Profit before tax 2,323 1,184
Less: Tax 413 108
Net Profit 1,910. 1,076
Add: Profit brought forward 600 500
Profit available for 2,510 1,576
appropriation
Less: Dividend on Equity 430 358
Shares
Less: Tax on Dividend 73 61
Less: Transfer to General 1,407 557
Reserve
Balance carried forward to 600 600
Balance Sheet
2. COMPANY PERFORMANCE
For the year ended 31st March, 2008, your Company achieved a sales
growth of 17.5% on an expanded base arising from 27.5% growth in the
previous year. Net Profit of the Company increased 77.5% to Rs. 1,910
Mn compared to Rs. 1,076 Mn in 2006-07. Operating margin increased by
307 basis points to 7.5%.
The Company witnessed all round growth in key categories with Biscuits
recording sales of Rs. 23,299 Mn. Bread, Cake and Rusk business crossed
the Rs. 2,700 Mn mark during 2007-08. This business has doubled in two
years.
In an intensely competitive biscuit environment, all Power Brands of
the Company recorded double digit growth, with Tiger and Good Day
growing in excess of 20%. Your Companys innovation forays have
successfully addressed new benefit clusters and Nutri Choice Digestive
has claimed its position in the health and vitality space. Your Company
continues to maintain its leadership edge in 6 out of 7 key product
segments, the only exception being Glucose.
The business continued to face inflationary pressure in key raw
materials such as wheat flour, refined palm oil, skimmed milk powder
and other dairy products, as well as energy costs. These were more
than offset on the cost side through operational and procurement
efficiencies, productivity improvements, cost reduction programs and on
the revenue side through improved product mix and higher realisation,
aided by strong consumer off take.
Exceptional items for the year include Rs. 130.5 Mn towards
amortisation of VRS costs. Earnings per share is Rs. 80 compared to Rs.
45 last year.
3. DIVIDEND
The Board of Directors is pleased to recommend a dividend of 180% on
the paid up equity share capital of the Company, which works out to Rs.
18 per share, for consideration and approval by the shareholders at the
Annual General Meeting. The total payout amounts to Rs. 503 Mn
including dividend distribution tax of Rs. 73 Mn.
4. BUSINESS OUTLOOK
After several years of strong GDP growth, the Indian economy is
witnessing a slowdown. We enter the new financial year, in the midst of
a serious food crisis globally, which has led to high inflation in all
staples like wheat, rice, corn, pulses etc. We expect this supply
constrained inflationary environment to dampen industry growth in the
coming year.
In this scenario, your Company will continue to pursue a strategy to
identify and exploit profitable growth opportunities by increasing the
consumer preference and consumption of Britannia brands, leveraging the
three growth vectors of brand, geography and channel. The key themes
pursued by your Company are to increase brand relevance and
differentiation, improve availability, structurally building capability
and efficiencies to be cost competitive.
The overall level of brand and infrastructure investment has increased
with both national and regional players pursuing aggressive growth in
an increasingly competitive market.
From a consumer perspective, several new dimensions have opened up as
others have gained strength, spurred by lifestyle and life stage
choices. Your Company will continue to focus on providing a range of
enjoyable and healthy choices to consumers.
5. BRAND INVESTMENT
All Power Brands - Tiger, Good Day, Milk Bikis, Treat, MarieGold, 50:50
and NutriChoice saw significant investment in increasing preference and
purchase and secured double digit growth.
Your Company also introduced several new and renovated offerings in
Tiger, Good Day, Treat and MarieGold. The health and nutrition platform
was buttressed by Tiger Banana with iron-zor, fortified Milk Bikis,
renovated MarieGold and NutriChoice Digestive. To tap the more
indulgent consumers, your Company launched Good Day Classic Cookies,
while continuing to roll out individual consumption packs at the highly
affordable Rs. 5 price point.
The Bread, Cake and Rusk portfolio was strengthened with the successful
relaunch of Breads, fortified with vitamins and minerals, positioning
them firmly as the healthy start to your day. This innovation combined
with relevant consumer activation in key markets has seen a 30%+ growth
in the Bread, Cake and Rusk business.
6. INTELLECTUAL PROPERTY RIGHTS (IPR)
Last year we reported the creation of the IPR Committee of the Board to
monitor and direct the Companys IPR. The key issue addressed by the
Committee was the unauthorised use by Generate Biscuit, a subsidiary of
Groupe Danone, of your Companys Tiger brand in five countries and
registration in a large number of other countries. Based on legal
advice, your Company initiated proceedings against Generale Biscuit,
and its
Associates in Singapore and Malaysia. Further, during the year, Groupe
Danone divested its biscuit business worldwide (with the exception of
India and Latin America) including Generale Biscuit, in favour of M/s
Kraft Inc. USA and your Company continues to pursue the return of its
Tiger IPR under the direction of the Committee.
7. MANUFACTURING OPERATIONS
Following the significant addition to manufacturing capacity in the
previous year, the focus in 2007- 08 was to increase responsiveness and
cost effectiveness of the supply chain.
Several technology innovation projects to secure cost and quality
advantages and support introduction of differentiated products were
completed. New technology based products were successfully manufactured
using equipment designed internally. During the year your Company filed
for 2 patents.
Uttarakhand factory continued to perform at high efficiency levels and
reached full capacity utilisation of 5,000 Tonnes/month. Overall
conversion costs were reduced due to efficiency and productivity
improvements in manufacturing.
Capacity for Bread, Cakes and Rusks was also expanded with a
greenfield, state of the art, cake manufacturing facility in Assam.
With a view to optimise capacities and manufacturing cost, your
Company, in April 2008, offered a Voluntary Retirement Scheme (VRS) to
workmen at its Chennai unit. The same was accepted by all the workmen
and consequently manufacturing operations have been suspended.
8. QUALITY STANDARDS
Notable progress was made in quality, the drive for ongoing quality
training, including the development of an e-learning portal. The vendor
quality improvement program was intensified and the continuous
grinding in of quality practices at all manufacturing units formed a
key plank of building a quality culture.
A retail audit system was rolled out to monitor quality of products at
point of sale.
9. INFORMATION TECHNOLOGY
Several initiatives were undertaken to enhance business performance,
enabled by IT infrastructure and processes. These included availability
of timely and granular information to improve planning and performance
measurement in manufacturing, logistics, distribution, sales and
quality.
Information protection infrastructure and systems were significantly
strengthened. With the objective of securing the best IT competencies,
higher service levels for users, better infrastructure management and
inflation proofing cost, IT was outsourced in its entirety to Hewlett
Packard (HP) with a lock in period of 3 years.
10. ENVIRONMENT AND SAFETY
The drive to reduce energy consumption through process innovations and
technology upgradation continued during the year. Burner efficiency
improvement was achieved through use of magnetic resonance energisers
for fuel.
Recycling of the waste heat was extended to manufacturing locations as
also the usage of alternate energy sources like gas which was extended
wherever available, including Delhi factory as well as contract
packers.
Your Company has filed an application for availing carbon reduction
benefits under the Clean Development Mechanism of the Ministry of
Environment and Forests, Government of India as part of the United
Nations Framework for Climate Change Control (UNFCCC) for the Delhi
factory.
11. CORPORATE SOCIAL RESPONSIBILITY
The partnership your Company has created with Global Alliance for
Improved Nutrition (GAIN) and the Naandi Foundation to supply iron
fortified Tiger biscuits to supplement the Mid-Day Meal program in
schools, has been recognised as a unique program globally by GAIN. This
prompted the World Bank Institute to write a case study and your
Company was invited to make a commitment to the Clinton Global
Initiative, a non-partisan catalyst for action that brings together a
community of global leaders to devise and implement solutions for some
of the worlds pressing challenges like nutrition.
Iron deficiency among Indian children is a key cause of school dropouts
as well as decreased productivity. Based on the experience from the
Britannia-GAIN-Naandi partnership, your Company created a new offering
for all consumers - Tiger Banana, a delightful banana biscuit fortified
with vitamins and minerals.
In keeping with its core essence of Swasth Khao Tan Man Jagao, your
Company constantly strives to find sustainable opportunities to drive
home the message of nutrition and good food habits among children at
the right age. Britannia is committed to help secure every childs
right to growth and development through good food everyday. Its largest
power brand, Tiger, is also being rolled out, fortified with iron.
Your Company was also the first in the industry to remove trans fat
from most its biscuits as yet another meaningful step in offering
products that are both healthy and enjoyable.
12. PENSION
The Britannia Industries Limited Covenanted Staff Pension Fund (Trust)
received a Show Cause Notice from the Commissioner of Income Tax,
Kolkata, asking the Trust to show cause why the recognition granted to
the Trust should not be withdrawn for refund of excess contribution of
Rs. 121.2 Mn to the Company. The matter has been dealt with in note No.
29 of Schedule T to the Accounts, which is self explanatory.
13. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Details of energy conservation, technology absorption, foreign exchange
earnings and outgoings in accordance with the provisions of clause (e)
of sub-section (1) of Section 217 of the Companies Act, 1956, read with
the Companies (Disclosure of the Particulars in the Report of Board of
Directors) Rules, 1988, are given as an annexure to the Directors
Report.
14. CONSOLIDATED FINANCIAL RESULTS
Your Company has prepared Consolidated Financial Statements in
accordance with Accounting Standard 21(AS-21) issued by the Institute
of Chartered Accountants of India. The Consolidated Statements reflect
the results of the Company with that of its Subsidiaries, Joint
Ventures and Associates. As required by Clause 32 of the Listing
Agreement with the Stock Exchanges, the Audited Consolidated Financial
Statements together with the Auditors Report thereon are annexed and
form part of this Annual Report.
The Consolidated turnover and net profits of the Company for the year
ended 31st March, 2008 were Rs. 28,099 Mn and Rs. 1,774 Mn
respectively.
15. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
Your Directors present herewith a broad overview of the operations and
financials of its Subsidiaries, Joint Ventures and Associates.
Subsidiaries
Investment and Holding Companies
M/s Boribunder Finance and Investments Private Limited (Boribunder),
M/s Flora Investments Company Private Limited (Flora) and M/s Gilt Edge
Finance and Investments Private Limited
(Gilt Edge) form the Investment Associates of your Company. During
2007-08, M/s Boribunder Finance and Investments Private Limited
(Boribunder) became a wholly owned subsidiary of your Company.
The combined revenue and loss of investment companies for the year
ended 31st March, 2008 was Rs. 24 Mn and Rs 14 Mn respectively. The
losses are due to provision for diminution in value of investments.
Further, pursuant to Section 4 of the Companies Act, 1956, the
following companies engaged in manufacture of biscuits at various
locations are also deemed to be subsidiaries of your Company. The
Gross Income and Net Profit of the said subsidiaries during 2007-08 are
as under:
Name of Subsidiary Gross Net Profit/ Income (Loss)
Rs.Mn Rs.Mn
International Bakery 106 3.5
Products Limited, TC
Balam, Tamil Nadu
J B Mangharam Foods 98 (7.4)
Private Limited, Gwalior
Manna Foods Private 30 1.6
Limited, Bangalore
Ganges Vally Foods 96 0.6
Private Limited, Kolkata
Sunrise Biscuit 83 (0.3)
Company Private
Limited, Guwahati
Britannia and Associates (Mauritius) Private Ltd.
Britannia and Associates (Mauritius) Private Ltd, (BAMPL) a Company
formed in Mauritius is the holding Company of Britannia and Associates
(Dubai) Private Co. Ltd, (BADCO) a Jebel Ali Free Zone Company, which
in turn holds strategic investments in Strategic Food International Co.
LLC, Dubai and Al Sallan Food Industries Company SAOG, Oman.
The combined revenue and loss of the holding companies for the year
ended 31st December, 2007 was USD 0.62 Mn and USD 0.77 Mn respectively.
Joint Ventures
Britannia New Zealand Foods Private Limited (BNZF)
BNZF, the Joint Venture with M/s Fonterra Co-operative Group Limited of
New Zealand is engaged in the business of dairy products, comprising
cheese, skimmed milk powder, butter and ghee. BNZF brands are available
nationally and lead the cheese segment. For the year ended 31st March
2008, BNZF recorded a turnover of Rs. 1,424 Mn and incurred a net loss
of Rs. 51 Mn compared to a turnover of Rs. 1,186 Mn and a net loss of
Rs. 112 Mn in the previous year.
Strategic Foods International Co. LLC, Dubai (SFIC)
Your Company acquired 70% stake in SFIC in March 2007. For the year
ended 31st December, 2007, SFIC recorded a turnover of AED 104.02 Mn
and operating profit (before finance charges and depreciation) of AED
6.48 Mn and Net Loss of AED 3.14 Mn. During 2007 the business
encountered severe cost challenges due to unprecedented increases in
market prices of all key commodities like flour, skimmed milk powder,
etc. The Company has implemented several cost effectiveness programs
which, together with efficient buying, managed to contain part of the
input cost inflation.
Al Sallan Food Industries Company SAOG, Oman (Al Sallan)
Your Company acquired 65.5% stake in Al Sallan in March 2007. Al Sallan
recorded a turnover of RO 3.24 Mn for the year ended 31st December,
2007.
Both these acquisitions have given your Company the opportunity,
infrastructure and competence to effectively compete in the rapidly
growing markets of the Middle East.
Daily Bread Gourmet Foods (India) Private Limited (Daily Bread)
Daily Bread, another acquisition made last year, is engaged in the
business of premium bakery products. The Company registered a growth of
47% last year. It has continued to focus on expanding its retail
presence as well as drive institutional business through addition of
new customers. As a part of this strategy, new manufacturing facilities
were set up in Delhi and Hyderabad while expanding capacity at
Bangalore.
Welfare Companies
M/s Britannia Employees General Welfare Association Private Limited,
M/s Britannia Employees Educational Welfare Association Private Limited
and M/s Britannia Employees Medical Welfare Association Private Limited
are the three other associates of your Company.
These are companies limited by guarantee and have no share capital.
These have been set up for general, educational and medical welfare of
the employees of your Company.
16. CORPORATE GOVERNANCE
In accordance with Clause 49 of the Listing Agreement with the Stock
Exchanges, a separate report on Corporate Governance along with the
Auditors Certificate on its compliance is attached to this Report.
17. DIRECTORS
Consequent to taking over as Chairman of the Finance Commission
constituted by the Government of India, Dr. Vijay Kelkar resigned as
Director of your Company with effect from 31st December, 2007. Your
Board records its deep gratitude and appreciation for the various
contributions made by Dr. Kelkar during his association with the
Company.
Mr. Georges Casala resigned as a Director of your Company with effect
from 28th May, 2008. Your Board records its deep gratitude and
appreciation for the various contributions made by Mr. Casala during
his association with the Company.
Your Board appointed Mr. Philippe Loic Jacob as an Additional Director
at its meeting on 28th May, 2008. Mr. Jacob will hold office upto the
date of the forthcoming Annual General Meeting of the Company.
In accordance with the provisions of the Companies Act 1956 and the
Articles of Association of the Company, Mr. S S Kelkar, Mr. Pratap
Khanna, Mr. Nusli N Wadia and Mr. Francois-Xavier Roger, Directors,
retire by rotation at the forthcoming Annual General Meeting and are
eligible for reappointment.
18. PARTICULARS OF EMPLOYEES
Information in accordance with sub-section (2A) of Section 217 of the
Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 1975, and forming part of the Directors Report for the year
ended 31st March, 2008 is also given in the annexure to this report.
19. AUDITORS
M/s. Lovelock & Lewes retire in accordance with the provisions of the
Companies Act, 1956. They have indicated their willingness to continue
in office and are recommended for reappointment as the Companys
Auditors for the ensuing year.
20. DIRECTORS RESPONSIBILITY
Pursuant to sub-section (2AA) of Section 217 of the Companies Act,
1956, your Directors, based on representations from the Operating
Management, confirm that:
I. In the preparation of annual accounts, the applicable accounting
standards have been followed and there are no material departures;
II. They have, in selection of the accounting policies, consulted the
statutory auditors and applied these policies consistently, making
judgments and estimates that are reasonable and prudent, so as to give
a true and fair view of the state of affairs of the Company as on 31st
March, 2008 and of the profit of the Company for the year ended 31st
March, 2008;
III. They have taken proper and sufficient care, to the best of their
knowledge and ability, for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956
for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
IV. They have prepared the annual accounts on a going concern basis.
21. ACKNOWLEDGEMENTS
The Directors would like to thank all stakeholders, namely, customers,
shareholders, dealers, suppliers, bankers, employees and all other
business associates for the continuous support given by them to the
Company and its management.
On behalf of the Board
Mumbai NUSLI N WADIA
28th May, 2008 CHAIRMAN
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