Varun Beverages Surpasses Expectations with Impressive Profit Growth

Varun Beverages, a prominent bottler for PepsiCo, has reported an unexpected rise in net profit for the April to June period, despite a decline in revenue due to unseasonal rainfall affecting sales. The consolidated net profit for the first quarter of FY26 reached ₹1,317 crore, surpassing Bloomberg’s expectation of ₹1,216.3 crore. This marks a 5.1% increase compared to ₹1,253 crore from the same period last year.

The company also experienced a rise in operating profit, contrary to expectations for a drop, which led to a surge in its stock price. On Tuesday, the stock closed at ₹512.20 on the BSE, up 5.25% from the prior day’s end. Notably, Varun Beverages follows a calendar year format for its financial reporting.

Expansion of Margins Amid Revenue Decline

Revenue dipped by 2.5% to ₹7,017 crore in the June quarter, down from ₹7,197 crore the previous year. In its investor presentation, Varun Beverages indicated a 3% year-on-year decrease in consolidated sales volume, at 389.7 million cases, compared to 401.6 million cases in the same quarter last year.

Bloomberg’s consensus had estimated revenue for this quarter at ₹7,358.9 crore. Earnings before interest, taxation, depreciation, and amortization (EBITDA) saw a slight increase of 0.4%, reaching ₹1,999 crore, up from ₹1,991 crore last year. The EBITDA margin improved to 28.8%, up from 27.7% last year, while street estimates predicted these margins to be around 25.7%.

This margin growth can be attributed to operational efficiencies and favorable currency movements in international markets. The gross margins held steady at 54.5% during this quarter.

Strong Performance in International Markets

Varun Beverages has also acquired a 50% stake in Everest Industrial Lanka, a company based in Sri Lanka that focuses on the production, manufacturing, distribution, and sales of commercial visi-coolers and associated products.

In regional performance, sales volumes in India dropped by 7.1%, while international markets exhibited significant growth, with a notable 15.1% increase. South Africa’s sales alone rose by 16.1%, counterbalancing the overall decline in volumes.

The company boasts a net debt-free status, with free cash reaching ₹514.90 crore, providing a robust liquidity position. This financial strength enhances the company’s balance sheet and prepares it for future growth initiatives. ‘Despite the challenges posed by unseasonal rains this quarter, we have historically navigated such issues successfully and emerged stronger. We aim to reinforce our on-ground strategy by expanding our visi-cooler presence and ensuring broader product availability at retail locations,’ stated Ravi Jaipuria, chairman of Varun Beverages.