Varun Beverages Ltd Aug2025 Conference Call Summary

Varun Beverages Limited Q2 & H1 CY2025 Earnings Conference Call (July 29, 2025)

(VBL follows calendar year; Q2 CY2025 = April-June 2025)

Consolidated volume: 389.7 million cases (-3% YoY; India -7.1%; International +15.1%)
Revenue: INR 70,173 million (-2.5% YoY)
Gross margin: 54.5% (stable)
EBITDA: INR 19,988 million (+82 bps YoY to 28.5% margin; strong despite India volume decline)
PAT: INR 13,255 million (+5% YoY)

H1 CY2025:

Revenue: INR 125,843 million (+9.3%); EBITDA: INR 32,627 million (+9.5%); PAT: INR 20,568 million (+13.6%)

Worst early-onset monsoon in India in recent history; April-June all impacted
4 new greenfield plants commissioned (Prayagraj, Buxar, Damtal, Mendipathar): came online April-May; added costs but little volume contribution
Capacity utilization: ~70%; sufficient headroom for next 2 years
Small packs outperformed large packs (outdoor events, weddings fewer)
International strong: South Africa +16.1%; Morocco + Zambia doing well; Zimbabwe impacted by sugar tax (recovering)

Freight: larger distributors consolidated -> larger load sizes; closer plants -> lower distances
New plant efficiencies: 5x production per line vs old plants; lower cost to produce
Power: more renewable energy added
Manpower rationalization: all routes re-looked
Other costs down ~11% YoY; sustainable going forward
India: net debt-free post-QIP; earning interest on cash deposits

Q2 International: revenue +23% YoY; EBITDA growth ~45% YoY
Drivers: backward integration (Zambia, DRC, Morocco); favorable Africa currencies; lower international sugar prices
Morocco: commercial production of Cheetos snacks commenced (Q2 CY2025 - major milestone)
Zimbabwe: volumes recovering; sugar tax impact diminishing
DRC: first year of new plant; stabilizing

Everest Cooler JV: VBL took 50% equity in Everest's Sri Lanka plant; will manufacture visi-coolers for South + West India
Visi-cooler placements: up ~15% YoY
Morocco Cheetos: first snack product commercially produced; high initial response

H1 CY2025 capex: ~INR 25,000 million
India FY26 capex: INR 600-700 crores (low; no new plants needed for next 2 years)
International: expanding South Africa; other countries
4 million outlets; target +10% (300,000-400,000) in CY2025 (weather slowed rural distribution)

Official guidance: 21%+ consolidated; delivering 28.5% in Q2
"We always try to attain better than what we say"
No plans to cut spending to chase margins; focused on volume growth which drives operating leverage