LT Foods Ltd., the well-known owner of basmati rice brands Daawat and Royal, has reported a mixed performance in its financial results for the second quarter of FY25. In a regulatory filing on Thursday, October 24, 2024, the company posted a 4.3% decline in net profit on a year-on-year (YoY) basis, recording ₹150.6 crore compared to ₹157.3 crore in Q2 FY24.

Despite the drop in profitability, LT Foods saw a 6.6% rise in revenue, with operational revenues growing from ₹1,977.8 crore in the previous year’s quarter to ₹2,107.8 crore in Q2 FY25. This increase in revenue demonstrates the company's ability to drive growth even in the face of challenges.

Performance at the Operating Level

At the operating level, EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) experienced a dip. The company reported an EBITDA of ₹229.3 crore, a 4.7% decline compared to ₹240.6 crore in the same quarter last year. The EBITDA margin also declined slightly, standing at 10.9% compared to 12.2% in the corresponding quarter of the previous fiscal.

The reduced margins indicate pressure on profitability, which could be due to rising costs or competitive pricing strategies in the basmati rice market, where brands like Daawat and Royal are major players. Nevertheless, the company continues to maintain a robust position in the global rice market, driven by its strong brand presence and diversified product portfolio.

Dividend Announcement

In light of its performance, the board of directors has declared a third interim dividend of ₹0.50 (50%) per share of face value ₹1 each for the fiscal year 2024-25. The record date for the interim dividend has been fixed for Monday, November 04, 2024, with payments expected to be made within 30 days of the declaration. This dividend declaration reflects the company's confidence in its future outlook and its commitment to rewarding shareholders, even amidst a slight profit dip.

LT Foods’ dividend is seen as a gesture of trust in the company’s operational strength and long-term growth trajectory. Investors, despite witnessing a decline in net profit, may find this positive as it indicates that the company remains committed to maintaining shareholder value.

Key Highlights of LT Foods' Q2 FY25 Financial Results

• Net Profit Decline: LT Foods' net profit fell 4.3% YoY to ₹150.6 crore, down from ₹157.3 crore in the previous year’s corresponding quarter.
• Revenue Growth: The company’s revenue from operations increased by 6.6%, reaching ₹2,107.8 crore in Q2 FY25 compared to ₹1,977.8 crore in Q2 FY24.
• EBITDA Decline: EBITDA decreased by 4.7% YoY to ₹229.3 crore, with margins dropping to 10.9%, reflecting operational challenges.
• Interim Dividend: A third interim dividend of ₹0.50 per share has been declared, with a record date set for November 04, 2024.

Market Overview and LT Foods’ Position

LT Foods Ltd has maintained its leadership in the premium basmati rice market, both in India and globally. Its flagship brands Daawat and Royal have a strong customer base, contributing significantly to the company’s revenues. However, the slight decline in EBITDA margin signals competitive pressures or rising input costs, which the company will need to address in the coming quarters.

The rice industry has faced a turbulent year, with fluctuating demand, changes in export policies, and inflationary pressures affecting operational costs. However, LT Foods remains well-positioned to navigate these challenges, thanks to its established distribution network, ongoing brand investments, and commitment to maintaining product quality.

Outlook for Investors

Investors in LT Foods Ltd will be keenly watching how the company manages its costs and sustains growth in the coming quarters. While the 4.3% dip in net profit might raise concerns, the overall revenue growth and the third interim dividend suggest that the company remains fundamentally strong.

The interim dividend, though modest, offers a return to shareholders, and the revenue growth demonstrates the resilience of LT Foods in a competitive and inflation-affected market. Investors are advised to monitor the company’s upcoming quarters closely, especially any updates on cost management strategies and market expansion efforts.

LT Foods' shares, driven by the performance and dividend announcement, will likely remain of interest to both institutional and retail investors. As the company continues to expand its market footprint and address the profitability challenges, it could see more positive market reactions in the future.

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