Hatsun Agro Product expands its dairy product portfolio

The Q1 profit margins for the dairy industry this year have seen a sharp decline as compared to that of Q1FY17. While Chandrababu Naidu-promoted Heritage Foods posted net profit of Rs 17.11 crore last year, this year, it has only been Rs 10.37 crore. Similarly, Kwality Ltd reported a sharp decline in its June quarter profits to Rs 27.88 crore, from Rs 42.27 crore a year ago, while Umang Dairies posted a loss of Rs 2.90 crore compared to a Rs 1.48 crore profit. Interestingly, net sales of both companies jumped by 7 per cent and 11 per cent, respectively.

Companies with increased focus on value-added products, such as Parag Milk Foods and Hatsun Agro Products, however, have maintained their profit margins in the June quarter despite interruption in milk supply due to the farmers' mass protest and roadblock. While organised sector players are adjusting increase in compliance cost of GST (goods and services tax), rollout without an increase in product prices, unorganised sector players are considering raising milk prices by Rs 2-4 a kg to pass on the increased cost burden to consumers. "

"Gross margins of Heritage Foods were impacted by an increase in milk procurement cost which the company was unable to pass on to the consumers completely. EBITDA margins at 4.4 per cent was also hit by loss making Reliance Dairy business and increase in other expenditure which grew by 37.8 per cent yoy a function of higher branding expenditure. However, the company is confident with initiatives taken on cost optimization and expectation of lower milk procurement cost post monsoons. We expect the recovery to be gradual," said Dhaval Mehta, an analyst with Emkay Global Financial Services Ltd.

According to R S Sodhi, Managing Director, Gujarat Cooperative Milk Marketing Federation (GCMMF) which sales Amul brand dairy products, "Milk prices had declined drastically over the last one year. Milk prices, therefore are recovering. Prices are likely to remain stabilised now."

"We intend to increase our direct procurement to over 50% over the next 3-4 years. This would accelerate the transition towards B2C by enabling faster shifting of our product mix towards consumer products, primarily fresh milk and value-added products. With our persistent focus on B2C segment, strong position in north markets, and planned product rollouts of value-added products, we shall continue to witness strong growth in the forthcoming years. We believe favourable demographics such as rising disposable income and changing consumer lifestyle would further support our growth story," said Nawal Sharma, president & head business transformation, Kwality Ltd. 

Chennai-headquartered dairy products maker, Hatsun Agro Product Ltd, has entered into a pact with Germany-based, GEA, to set up a Greenfield plant in Tamil Nadu at an investment of Rs 120 crore.

According to a company statement issued by GEA, "Hatsun Agro Product is currently establishing an automated greenfield dairy project at Dharapuram near Coimbatore in Tamil Nadu. The company has contracted GEA to install it (the factory) on turnkey basis."

The factory, expected to become operational next year, would have a capacity to produce three lakh litres of milk per day in pouches and 1.50 lakh litre of curd, it said.

The manufacturing unit is expected to be fourth largest plant for the Chennai-based dairy maker. GEA would provide an RO plant for concentration of skimmed milk at the factory. It would also provide specialised equipment like homogenizer and flow components at the factory.

Abhay Chaudhari, Country Managing Director, GEA India Cluster, said, "So far, GEA had been supplying components to HAP and it is a great pleasure to be able to partner HAP (Hatsun Agro Products) on their turnkey project."