McCain India Sees Net Profit Plummet by 29% in FY24 Due to Rising Expenses
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Synopsis
In FY24, McCain India reported a significant 29% drop in net profit, attributed to rising costs and increased advertising expenses. Despite a modest revenue growth of 3%, total expenses surged, impacting profitability. The company faces challenges amid changing consumer preferences and competition in the frozen snack market.
Key Takeaways
- Net profit decreased by 29% to Rs 89 crore.
- Advertising costs rose by 63% to Rs 88 crore.
- Overall expenses increased to Rs 1,125 crore.
- Revenue from operations grew 3% to Rs 1,214 crore.
- Material procurement costs rose to Rs 493 crore.
New Delhi, April 6 (NationPress) McCain India, known for producing frozen snacks such as French fries and aloo tikki, has disclosed a significant 29% drop in its net profit for the financial year 2023-24 (FY24), attributed to escalating costs and increased expenditure on advertising and management fees.
According to the company’s filings with the Registrar of Companies, net profit decreased to Rs 89 crore in FY24 from Rs 126 crore in the previous year, despite a slight increase in revenue.
This profit decline coincides with a remarkable 63% hike in advertising costs, which surged to Rs 88 crore.
Additionally, management fees and other operational expenses also rose, adversely affecting the company’s margins.
Total expenses grew to Rs 1,125 crore in FY24 from Rs 1,020 crore in FY23. Material procurement constituted the largest cost, escalating to Rs 493 crore, which represents nearly 44% of overall spending.
Employee-related expenses have also increased by 19%, while extra costs related to fuel, freight, storage, and contract labor compounded the strain on profitability.
Despite these hurdles, the company managed to achieve a 3% growth in revenue, with operational revenue rising to Rs 1,214 crore in FY24 from Rs 1,172 crore in FY23.
When including income from interest on deposits and other sources, total revenue reached Rs 1,245 crore, an increase from Rs 1,189 crore the previous fiscal year.
Established in 1998, McCain has emerged as a key player in the frozen snacks market.
The company distributes its products via retail stores, restaurants, and quick-commerce platforms such as Blinkit, Swiggy Instamart, and Zepto.
However, it faces intensifying competition and changing consumer preferences, especially with the increasing focus on healthy eating.
Reports indicate that while the appetite for fried snacks remains robust in India, McCain’s long-term viability may hinge on expanding its presence in smaller towns and enhancing its cold chain logistics.
Despite achieving a return on capital employed (ROCE) of 15.28% and an EBITDA margin of 4.58%, the notable profit decline underscores the necessity for McCain to improve its management of rising costs, as highlighted in reports.
