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November 14, 2016

Parag Milk Foods H1 profits up amid value-added focus

Parag Milk Foods, the India-based dairy business, has reported higher first-half profits, helped in part by lower finance costs, although the company reported better gross margins as sales of value-added products grew and it continued to focus less on skimmed milk powder.

By Dean Best

Parag Milk Foods, the India-based dairy business, has reported higher first-half profits, helped in part by lower finance costs, although the company reported better gross margins as sales of value-added products grew and it continued to focus less on skimmed milk powder.

The company’s profit after tax in the six months to 30 September stood at INR251.4m (US$3.7m), up from INR167.3m a year earlier. Parag Milk Foods’ EBITDA grew 1.2% to INR707m. However, the owner of the Go dairy brand reported a decline on this metric in the second quarter amid an increase in advertising and promotional spending.

Revenues were up 1.5% at INR4.73bn, although growth slowed to 0.7% in the second quarter. Parag Milk Foods pointed to a 41% fall in sales of skimmed milk powder. Sales outside that division were up 6% in the second quarter. The company said a “slowdown in rural demand” weighed on its overall revenues in the second quarter.

In a presentation to analysts last week, Parag Milk Foods set out ways in which it plans to grow its business over the next three years.

Parag Milk Foods, for example, plans to move the product mix within its value-added business towards more “margin-accretive” lines, such as whey, UHT, beverages and cheese. It has set a target for its value-added products to account for 70% of sales in three years’ time, up from 66% at present. It is investing in cheese production and said it expects “robust growth” in UHT and whey products.

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