Analysis of Britannia Industries Limited Financials and Ratios
1. Analysis of Britania Industries Limited
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Company Overview
Britannia biscuit company was started in 1892 in kolkotta .In 1920 with the help of electricity
it mechanised its operations. In 1921 it became first company to import electric ovens.
During world war two they were the contractors to supply biscuits to armed forces.
In 1975 they took over distribution system of parry‟s. Iin 1975 they become as Indian listed
company with more than 60% held by Indian public and it became Britannia industries
limited. In 1983 it crossed 100 crores revenue turn over mark. In 1997 the company
repositioned itself as “Eat Healthy, Think Better”. By becoming the core sponsors for 1999
world cup they enhanced their brand identity and brand image. The Lagaan Match was voted
India‟s most successful promotional activity of the year 2001 while the delicious Britannia
50-50 Maska-Chaska became India‟s most successful product launch. In 2002, Britannia‟s
New Business Division formed a joint venture with Fonterra, the world‟s second largest
Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. Was born. In recognition of its
vision and accelerating graph, Forbes Global rated Britannia „One amongst the Top 200
Small Companies of the World‟, and The Economic Times pegged Britannia India‟s 2nd
Most Trusted Brand.
Innovation is the KEY MANTRA
In this highly competitive market Britannia survives because of its continuous product and
marketing innovation.
Its reposition into Eat Healthy and Think Better touched the emotional part of all Indians
and enhanced its brand image and market cap.
Its continuous innovation and its low-cost variety to reach the market depth like “TIGER
BISCUITS” are notable innovative strategies by the company.
Even if you take Milk Bikis it changed its wrapper, form and size continuously to break
monotony in the minds of the consumer.
Latest Innovations
Tiger Banana
NutriChoice Sugar Out
NutriChoice Digestive Biscuit
Treat Fruit Rollz
Britannia 50-50 Pepper Chakkar
New Britannia Milk Bikis
Financials
2. Britannia Industries Ltd. (BIL), one of India‟s leading food Companies, reported sales of Rs.
25,848 MM for the year ended 31st March 2008. This reflects a 17.5% growth over the
previous year. Net Profit for the year at Rs. 191 crores grew by 77.6%. Operating margin
improved by more than 300 basis points.
For the last quarter of the year, the Company reported Net Sales of Rs. 6,92 crores & Net
Profit of Rs. 61 crores, up 15.6% & 53.6% respectively, over the corresponding quarter last
year. The Board of Directors has recommended a dividend of Rs. 18 per share of Rs. 10 each.
Total payout including Dividend Distribution Tax amounts to Rs. 50 crores for the year.
In the food processing industry it ranks 2nd among the top 3 in net sales in India
Rank Company Net Sales(03/07)
1 Nestle 3500 crores
2 Britannia 2200 crores
3 Glaxo smith 1300 crores
Ratios
Mar Mar Mar Mar Mar
Ratio
2007 2006 2005 2004 2003
Operating margin (%) 5.85 11.72 11.58 11.21 11.35
Gross profit margin
4.70 10.46 10.39 9.65 9.34
(%)
Net profit margin (%) 4.86 8.48 9.25 8.16 7.59
Current ratio 1.02 1.35 1.18 1.10 0.86
Operating Profit Margin
Operating profit ratio=operating profit (EBIT)/sales
The decrease in operating profit margin in 2007 can be because of increase in the cost of raw
materials and commodities like wheat and sugar. The material cost has gone up significantly
from the year 2006 to 2007.
Gross Profit Margin
Gross Profit Ratio=Gross Profit/Sales
3. The decrease in Gross profit margin in 2007 can be because of increase in the cost of raw
materials and commodities like wheat and sugar. The material cost has gone up significantly
from the year 2006 to 2007.
Net Profit Margin
It is calculated as
Net Profit Ratio=EAT/Net Sales
The decrease in net profit margin in 2007 can be because of increase in the cost of raw
materials and commodities like wheat and sugar. The material cost has gone up significantly
from the year 2006 to 2007.
Current Ratio
It is defined as current assets divided by current liabilities. It is a measure of short term
financial liquidity of the firm.
Current Ratio= Current Assets/Current Liabilities
Analysis
A current ratio of 2:1 is always considered as optimum means that there is a 50 % safety
margin in terms of assets to cover its current liabilities. However this doesn‟t mean higher
current ratio is good. It may signify higher unused cash, inventory which again may result in
inventory carrying cost. A current ratio of around 1 seem to be numerically not attractive
based on logics however for a company like brittnia with huge brand equity and market cap
this doesn‟t have significant negative impact from investors point of view or financial
strength point of view.
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4. July 14th, 2008 in Analysis | tags: brittania industries, Technical Analysis
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2009Analysisbritannia
Strategy: Porter's Five Forces Model: analysing industry structure partner-pu
Defining an industry FORID:10
ISO-8859
An industry is a group of firms that market products which are close substitutes for each other (e.g. the car industry, the travel industry).
me industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry.
Search
ost influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model, which is described
below:
6. Related res
Study materials abou
forces model on the
Stu
Related Stud
What is S
Anso
Bosto
Bench
Competitive Ad
Competitor
Core Comp
GE Indust
McKinsey Growth
explains that there are five forces that determine industry attractiveness and long-run industry profitability. These five "competitive forces" are
O
- The threat of entry of new competitors (new entrants) PEST
- The threat of substitutes Five Forc
- The bargaining power of buyers
- The bargaining power of suppliers Strategy and M
- The degree of rivalry between existing competitors
Strategic R
Threat of New Entrants Strate
SWOT
ntrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the
rs to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, Value Chain
restaurants). Key barriers to entry include
- Economies of scale
- Capital / investment requirements
- Customer switching costs
- Access to industry distribution channels
- The likelihood of retaliation from existing industry players.
Threat of Substitutes
esence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products
depends on:
- Buyers' willingness to substitute
- The relative price and performance of substitutes
- The costs of switching to substitutes
Bargaining Power of Suppliers
Suppliers are the businesses that supply materials & other products into the industry.
ost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company's profitability. If suppliers have
argaining power over a company, then in theory the company's industry is less attractive. The bargaining power of suppliers will be high when:
- There are many buyers and few dominant suppliers
- There are undifferentiated, highly valued products
- Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers threatening to set up their own retail outlets)
- Buyers do not threaten to integrate backwards into supply
- The industry is not a key customer group to the suppliers
7. Bargaining Power of Buyers
Buyers are the people / organisations who create demand in an industry
The bargaining power of buyers is greater when
- There are few dominant buyers and many sellers in the industry
- Products are standardised
- Buyers threaten to integrate backward into the industry
- Suppliers do not threaten to integrate forward into the buyer's industry
- The industry is not a key supplying group for buyers
Intensity of Rivalry
The intensity of rivalry between competitors in an industry will depend on:
tructure of competition - for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an
industry has a clear market leader
e structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting
gree of differentiation - industries where products are commodities (e.g. steel, coal) have greater rivalry; industries where competitors can
differentiate their products have less rivalry
tching costs - rivalry is reduced where buyers have high switching costs - i.e. there is a significant cost associated with the decision to buy a
product from an alternative supplier
gic objectives - when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where competitors are "milking" profits in a
mature industry, the degree of rivalry is less
barriers - when barriers to leaving an industry are high (e.g. the cost of closing down factories) - then competitors tend to exhibit greater rivalry.
Other Strategy Revision Notes:
Ansoff Growth Matrix | BCG Matrix | Balanced Scorecard - Intro| Balanced Scorecard - Perspectives
Business Planning - Intro | Business Planning - Process | Writing a Business Plan - Introduction
Business Plan - Contents | Benchmarking |
Corporate objectives | Functional objectives |
Types of Change | Change Management - Intro | Change Management - Lewin
Change Management- Barriers |Change Management - Implementation | Competitive Advantage
Competitor Analysis | Core Competencies | CSR - Intro | CSR - Issues | CSR - BITC
Ethics - Introduction | Ethics - Issues and Examples |
Growth - methods of development | Acquisitions (Intro) | Acquisitions evaluation
Industry competition and profitability |
GE Matrix | McKinsey Growth Model | Globalisation Intro | Globalisation Drivers
Mission Statements | Risk (Introduction) | Risk Management | Contingency planning
Business Objectives | PEST Analysis | Porter's Five Forces | Resources & Strategy |Seasonality
Strategic Audit | Stakeholders - Intro | Stakeholders - Interest & Power | Strategy & Marketing
8. SWOT Analysis | Value Chain Analysis | Vision | What is Strategy?
SWOT - Strengths | SWOT Weaknesses | SWOT Opportunities | SWOT Threats
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Britannia Chooses FlightVu Cockpit Door Monitoring System
Britannia Airways, the UK's largest charter airline and part of TUI AG, has chosen FlightVu video security for cockpit
door monitoring across its fleet of 19 B-757s and 13 B-767s.
AD Aerospace of Manchester UK, and AEI of Orlando USA are providing the video security system and installation
design respectively. The system enables the flight crew to monitor the area outside the flight deck door and adjacent
galleys without leaving their seats. The pilots can visually identify anyone requesting entry and to take appropriate
action should an incident arise.
"Britannia Airways selected the FlightVu cockpit door monitoring system to enhance the safety and security of our
passengers and crew," said Captain Colin Sharples, Director of Flight Safety, Quality and Environment at Britannia
Airways. "Our passengers' safety has always been the first priority for us and this adds a further layer to the processes
we already have in place."
Security measures have been increased throughout the airline industry. This in response to the heightened awareness
of risks from terrorism and air rage over the last few years. The introduction of intrusion resistant cockpit doors has
made the pilots, and the aircraft, safer but has isolated them, leaving them unaware of what is happening in the cabin.
This is where Close Circuit Television (CCTV) comes into use.
The FlightVu cockpit door monitoring system consists of three CCTV cameras linked to a LCD monitor or monitors
mounted in the cockpit pedestal in clear view of both pilot positions. The system also includes Infra Red illuminators
that allow the area to be viewed even with the cabin lights extinguished.
"FlightVu, and other cockpit door monitoring systems, which allow the flight crew to observe the area outside of the
flight deck are a major step forward in passenger airliner safety," said Mike Horne, Managing Director, AD
Aerospace. "We believe that the existence of secure flight deck doors and efficient CCTV surveillance will act
together to reduce the occurrence of major incidents."
FlightVu cockpit door monitoring systems have been or are being installed on aircraft for Britannia, easyJet, GB
Airways, MyTravel and bmi.
AD Aerospace Ltd., designs and manufactures aerospace video camera equipment, including state-of-the-art video
security systems. The company, part of the AD Holdings Group, is a CAA/JAA approved designer and manufacturer
of video camera systems for commercial aerospace, and an approved supplier to the Boeing Company. AD Aerospace
12. has facilities in Manchester UK and Atlanta USA.
Aircraft Engineering & Installation Services Inc. (AEI) is an Orlando, Florida based avionics integrator serving the
Air Transport, Regional Airline, and Heavy Corporate Jet markets. AEI engineers incorporate new avionics systems
into existing aircraft architecture and facilitate system certification. They then design and manufacture the custom
Avionics System Integration Kits required to install and activate the new equipment. AEI's engineering,
comprehensive system integration kits, and technical support provide its customers with the most trouble-free avionics
installations possible.
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is an essential part of production and is needed at every stage of manufacture. Parts must be correctly made or they
will not fit properly. The finished product should be free from defect. Poor quality control leads to slow and
expensive production. It also loses customers and sometimes results in expensive recalls.
In British and American factories quality control is the work of skilled inspectors who examine parts and finished
products. German and Japanese factories involve the workers themselves in quality control. Groups check their own
output and make suggestions to improve quality. The Japanese “quality circles” involve workers and managers. The
high standards achieved in this manner bring lower costs and more satisfied customers. Many American companies
are now instituting such circles
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Internal and External Analysis
Internal | External | SWOT Matrix | Competitive Analysis | Market Analysis
SWOT Analysis
SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities,
and Threats that are strategic factors for a specific company. A SWOT analysis should not
only result in the identification of a corporation‟s core competencies, but also in the
identification of opportunities that the firm is not currently able to take advantage of due to a
lack of appropriate resources. (Wheelen, Hunger pg 107)
The SWOT analysis framework has gained widespread acceptance because it is both simple
and powerful for strategy development. However, like any planning tool, SWOT is only as
good as the information it contains. Thorough market research and accurate information
systems are essential for the SWOT analysis to identify key issues in the environment.
(Marketing and Its Environment, pg 44)
Assess your market:
What is happening externally and internally that will affect our company?
Who are our customers?
What are the strengths and weaknesses of each competitor? (Think Competitive Advantage)
What are the driving forces behind sales trends?
What are important and potentially important markets?
What is happening in the world that might affect our company?
What does it take to be successful in this market? (List the strengths all companies need to
compete successfully in this market.)
Assess your company:
What do we do best?
What are our company resources – assets, intellectual property, and people?
What are our company capabilities (functions)?
Assess your competition:
How are we different from the competition?
What are the general market conditions of our business?
What needs are there for our products and services?
14. What are the customer-market-technology opportunities?
What are the customer’s problems and complains with the current products and services in
the industry?
What “If only….” Statements does a customer make?
Opportunityan area of “need” in which a company can perform profitably.
Threat
challenge posed by an unfavorable trend or development that would lead (in absence of a
defensive marketing action) to deterioration in profits/sales.
An evaluation needs to be completed drawing conclusions about how the opportunities and
threats may affect the firm.
EXTERNAL: MACRO- demographic/economic, technological, social/cultural, political/legal
MICRO- customers, competitors, channels, suppliers, publics INTERNAL RESOURCES:
the firm
Competitor analysis is a critical aspect of this step.
Identify the actual competitors as well as substitutes.
Assess competitors’ objectives, strategies, strengths & weaknesses, and reaction patterns.
Select which competitors to attack or avoid.
The Internal Analysis of strengths and weaknesses focuses on internal factors that give an
organization certain advantages and disadvantages in meeting the needs of its target market.
Strengths refer to core competencies that give the firm an advantage in meeting the needs of
its target markets. Any analysis of company strengths should be market oriented/customer
focused because strengths are only meaningful when they assist the firm in meeting customer
needs. Weaknesses refer to any limitations a company faces in developing or implementing a
strategy (?). Weaknesses should also be examined from a customer perspective because
customers often perceive weaknesses that a company cannot see. Being market focused when
analyzing strengths and weaknesses does not mean that non-market oriented strengths and
weaknesses should be forgotten. Rather, it suggests that all firms should tie their strengths
and weaknesses to customer requirements. Only those strengths that relate to satisfying a
customer need should be considered true core competencies.(Marketing and Its Environment,
pg 44)
The following area analyses are used to look at all internal factors effecting a company:
Resources: Profitability, sales, product quality brand associations, existing overall brand,
relative cost of this new product, employee capability, product portfolio analysis
Capabilities: Goal: To identify internal strategic strengths, weaknesses, problems, constraints
and uncertainties
The External Analysis examines opportunities and threats that exist in the environment. Both
opportunities and threats exist independently of the firm. The way to differentiate between a
strength or weakness from an opportunity or threat is to ask: Would this issue exist if the
company did not exist? If the answer is yes, it should be considered external to the firm.
15. Opportunities refer to favorable conditions in the environment that could produce rewards for
the organization if acted upon properly. That is, opportunities are situations that exist but
must be acted on if the firm is to benefit from them. Threats refer to conditions or barriers
that may prevent the firms from reaching its objectives.(Marketing and Its Environment, pg
44)
The following area analyses are used to look at all external factors effecting a company:
Customer analysis: Segments, motivations, unmet needs
Competitive analysis: Identify completely, put in strategic groups, evaluate performance,
image, their objectives, strategies, culture, cost structure, strengths, weakness
Market analysis: Overall size, projected growth, profitability, entry barriers, cost structure,
distribution system, trends, key success factors
Environmental analysis: Technological, governmental, economic, cultural, demographic,
scenarios, information-need areas Goal: To identify external opportunities, threats, trends,
and strategic uncertainties
The SWOT Matrix helps visualize the analysis. Also, when executing this analysis it is
important to understand how these element work together. When an organization matched
internal strengths to external opportunities, it creates core competencies in meeting the needs
of its customers. In addition, an organization should act to convert internal weaknesses into
strengths and external threats into opportunities.
SWOT
Focus on your strengths. Shore up your weaknesses. Capitalize on your opportunities.
Recognize your threats.
Identify
Against whom do we compete?
Who are our most intense competitors? Less intense?
Makers of substitute products?
Can these competitors be grouped into strategic groups on the basis of assets,
competencies, or strategies?
Who are potential competitive entrants? What are their barriers to entry?
Evaluate
What are their objectives and strategies?
What is their cost structure? Do they have a cost advantage or disadvantage?
16. What is their image and positioning strategy?
Which are the most successful/unsuccessful competitors over time? Why?
What are the strengths and weaknesses of each competitor?
Evaluate competitors with respect to their assets and competencies.
Size and Growth What are important and potentially important markets? What are their size
and growth characteristics? What markets are declining? What are the driving forces behind
sales trends?
Profitability For each major market consider the following: Is this a business are in which
the average firm will make money? How intense is the competition among existing firms?
Evaluate the threats from potential entrants and substitute products. What is the bargaining
power of suppliers and customers? How attractive/profitable are the market now and in the
future?
Cost Structure What are the major cost and value-added components for various types of
competitors?
Distribution Systems What are the alternative channels of distribution? How are they
changing?
Market Trends What are the trends in the market?
Key Success Factors What are the key success factors, assets and competencies needed to
compete successfully? How will these change in the future?
Environmental Analysis An environmental analysis is the four dimension of the External
Analysis. The interest is in environmental trends and events that have the potential to affect
strategy. This analysis should identify such trends and events and the estimate their likelihood
and impact. When conducting this type of analysis, it is easy to get bogged down in an
extensive, broad survey of trends. It is necessary to restrict the analysis to those areas relevant
enough to have significant impact on strategy.
This analysis is divided into five areas: economic, technological, political-legal, sociocultural,
and future.
Economic What economic trends might have an impact on business activity? (Interest rates,
inflation, unemployment levels, energy availability, disposable income, etc)
Technological To what extent are existing technologies maturing? What technological
developments or trends are affecting or could affect our industry?
Government What changes in regulation are possible? What will their impact be on our
industry? What tax or other incentives are being developed that might affect strategy
development? Are there political or government stability risks?
Sociocultural What are the current or emerging trends in lifestyle, fashions, and other
components of culture? What are there implications? What demographic trends will affect the
market size of the industry? (growth rate, income, population shifts) Do these trends
represent an opportunity or a threat?
17. Future What are significant trends and future events? What are the key areas of uncertainty
as to trends or events that have the potential to impact strategy?
Internal Analysis Understanding a business in depth is the goal of internal analysis. This
analysis is based resources and capabilities of the firm.
Resources A good starting point to identify company resources is to look at tangible,
intangible and human resources.
Tangible resources are the easiest to identify and evaluate: financial resources and physical
assets are identifies and valued in the firm‟s financial statements.
Intangible resources are largely invisible, but over time become more important to the firm
than tangible assets because they can be a main source for a competitive advantage. Such
intangible recourses include reputational assets (brands, image, etc.) and technological assets
(proprietary technology and know-how).
Human resources or human capital are the productive services human beings offer the firm in
terms of their skills, knowledge, reasoning, and decision-making abilities.
strategic planning analysis
18. Capabilities
Resources are not productive on their own. The most productive tasks require that resources
collaborate closely together within teams. The term organizational capabilities is used to refer
to a firm‟s capacity for undertaking a particular productive activity. Our interest is not in
capabilities per se, but in capabilities relative to other firms. To identify the firm‟s
capabilities we will use the functional classification approach. A functional classification
identifies organizational capabilities in relation to each of the principal functional areas.
strategic planning swot
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