Varun Beverages shares crash 7% after June quarter results, stock split and dividend announcements

Shares of Varun Beverages crashed around 7 percent in intra-day deals today, July 30, even after it posted decent results for the quarter ended June 2024 (Q2CY24). The firm also announced a stock split and an interim dividend with the results.

The PepsiCo bottler reported a 25.5 percent increase in profit after tax (PAT), reaching ₹1,261.83 crore for the June quarter, up from ₹1,005.42 crore in the same quarter last year. This profit growth was driven by volume increases and improved margins.

Revenue from operations grew by 28.3 percent year-on-year (YoY) to ₹7,196.86 crore, compared to ₹5,611.40 crore in the year-ago quarter.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) saw a 31.8 percent rise, reaching ₹1,991.2 crore YoY, up from ₹1,511.02 crore in the same period a year ago. The EBITDA margin improved by 74 basis points (bps) to 27.7 percent in Q2CY24, led by higher gross margins.

Gross margins also showed a significant improvement, rising by 222 bps to 54.7 percent from 52.5 percent during Q2CY23. The company attributed this growth to the timely procurement and storage of PET chips to benefit from pricing advantages, a focus on reducing sugar content, and lightweight packaging.

The consolidated sales volume grew by 28.1 percent to 40.16 crore cases in Q2CY24, up from 31.35 crore cases in Q2CY23. This figure includes 28 million cases from BevCo during the quarter. India volumes grew by 22.9 percent, while international volumes (excluding BevCo) remained flat, primarily due to the transition to zero sugar products in Zimbabwe, which did not affect profits.

"With strong performance in a key quarter, we are on track to deliver healthy double-digit growth this calendar year. India remains a high-demand market with massive growth potential, driven by a growing consuming class and a young population. To capitalize on this demand, we are focused on further strengthening our infrastructure, distribution network, and product portfolio. With a focus on strategic growth and leveraging new opportunities in both India and international markets, we are confident in our ability to deliver sustainable value to all stakeholders,” said Ravi Jaipuria, Chairman of Varun Beverages.

Varun Beverages announced a 2:5 stock split and an interim dividend of ₹1.25 per share for its shareholders.

"Sub-division/ split of the existing Equity Shares of the Company, such that each Equity Share having face value of ₹5/- (Rupees Five only) each fully paid-up, be sub-divided/split into such number of equity shares having face value of ₹2/- (Rupees Two only) each fully paid-up, subject to the approval of equity shareholders of the company through Postal Ballot,” the company stated in a filing with the stock exchanges.

This move is intended to encourage wider retail participation, according to Ravi Jaipuria. The record date for the split of existing shares will be decided after obtaining the necessary approval from the equity shareholders.

Despite the strong financial performance, the stock fell as much as 6.9 percent to ₹1,566.85 in intra-day trading on Tuesday. The stock is now over 8 percent away from its record high of ₹1,707.10, reached in the previous session. However, it has advanced 97 percent from its 52-week low of ₹796, recorded on July 31, 2023.

In the past year, the stock has provided multibagger returns, rallying nearly 110 percent and adding around 27 percent in 2024 year-to-date.

The sharp intra-day decline in Varun Beverages’ shares indicates a possible profit-booking by investors or market concerns over future growth prospects despite the company's robust quarterly performance and strategic initiatives.