McCain India profit shrinks 29 pc in FY24 amid rising costs

McCain India, the maker of frozen snacks like French fries and aloo tikki, reported a sharp 29 per cent decline in its net profit for the financial year 2023-24 (FY24), hit by rising costs and higher spending on advertising and management fees.

As per the company’s filings with the Registrar of Companies, net profit fell to Rs 89 crore in FY24 from Rs 126 crore in the previous year, even though the company recorded a modest growth in revenue.

The drop in profits comes amid a steep 63 per cent increase in advertising expenditure, which rose to Rs 88 crore.

Management fees and other operational costs also saw an upward trend, impacting the company’s margins.

Overall expenses climbed to Rs 1,125 crore in FY24 from Rs 1,020 crore in FY23. Material procurement remained the largest cost component for McCain India, rising to Rs 493 crore and accounting for nearly 44 per cent of total spending.

Employee costs also went up by 19 per cent, while additional expenses on fuel, freight, storage, and contract labour added to the pressure on the bottom line.

Despite these challenges, the company managed to grow its revenue by 3 per cent. Revenue from operations increased to Rs 1,214 crore in FY24 from Rs 1,172 crore in FY23.

Including income from interest on deposits and other sources, total revenue stood at Rs 1,245 crore, up from Rs 1,189 crore in the previous financial year.

McCain, which entered the Indian market in 1998, has become a major player in the frozen snacks segment.

It sells its products through retail outlets, restaurants, and quick-commerce platforms like Blinkit, Swiggy Instamart, and Zepto.

However, the company is facing increasing competition and evolving consumer preferences, particularly with the growing shift towards healthy eating.

According to reports, while the love for fried snacks in India remains strong, McCain’s long-term success may depend on expanding its reach into smaller towns and improving its cold chain logistics infrastructure.

Even with a return on capital employed (ROCE) of 15.28 per cent and an EBITDA margin of 4.58 per cent, the sharp fall in profit signals a need for McCain to better manage rising costs, as per reports.