Dairy sector to see 11-12pc revenue growth in FY23, helped by value-added products: report

According to a report, India’s organized dairy sector is expected to record revenue growth of 11-12% this fiscal year, the second consecutive year of double-digit growth, mainly driven by healthy demand for value-added products (VAP). ).

Revenue growth for the organized dairy sector this fiscal year will be a notch below last fiscal year’s 13% growth, according to the Crisil Ratings report.

This revenue growth will be driven by healthy VAP demand (28% of overall sales), even as fluid milk sales remain stable and the full-year benefits of the retail price increases implemented last fiscal year come true, he noted.

Within the VAP, a strong recovery is expected in demand for ice cream, curd and flavored milk, the report said.

However, operating profitability would moderate to 5% during this financial year, due to an increase in supply prices as well as transport and packaging costs.

Improved operational performance, together with well-managed balance sheets and better control of working capital will support a revival of dairies’ investment plans while maintaining their ‘stable’ credit outlook.

“We expect the demand for ice cream, curds and flavored dairy products to peak this summer due to excessively hot temperatures. The last two summers have been affected by COVID-19. This, combined with steady growth in demand for household consumption oriented products such as ghee and paneer, a strong recovery in the HoReCa segment (hotels, restaurants and cafes) and last fiscal year price increases will lead to a revenue growth of 13-14% in VAP this fiscal year,” noted Crisil Ratings Director Aditya Jhaver.

On the other hand, fluid milk sales are expected to support revenue growth of 9-10% this fiscal year, given the full-year benefits of the two price increases in the prior fiscal year, although volumes remain stable, he added.

Dairies had raised milk prices by Rs 2 per liter each in June 2021 and February 2022, which is expected to translate to a 4-5% year-on-year growth in average achievement for this financial year.

In addition, the impact of inflation on freight and packaging costs will moderate operating profitability to 5% this fiscal year from 5.3% last fiscal year.

The report indicates that gradual increases in retail prices will dampen operating profitability.

Strong domestic demand for VAP and fluid milk will limit skimmed milk powder (SMP) exports and prune stocks, he said.

”Dairies, including cooperatives, are relaunching investment plans this fiscal year after abstaining for two years. While this will increase long-term debt, controlled working capital debt due to SMP’s moderation in inventory and strong operating performance will keep their credit outlook ‘steady’,” added Tanvi Shah, Managing Partner. by Crisil Ratings.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)