Olympic Industries Ltd. one of the leading FMCG companies in Bangladesh has recently published its annual report for FY 2020-21. Revenue of the company increased by 13.4% from Tk 15,895.0 Mn in FY 19-20 to Tk 18,032.6 Mn in FY 20-21. However, profit only increased by 0.6% from Tk 2,025.0 Mn in FY 19-20 to Tk 2,037.4 Mn in FY 20-21.
Revenue
Revenue increased by 13.4% mainly due to 14.2% growth in Biscuit and Confection segment. Biscuit and confectionary segment revenue increased from Tk 15,895.0 Mn in FY 19-20 to Tk 18,032.6 Mn in FY 20-21. Despite the challenges of Covid-19, Olympic Industries have sold over 117,000 metric tons of Biscuit, Confectionery, Bakery and Snack products in FY 20-21 which was over 100,00 metric tons in FY 19-20. The company focused on volume by selling mid-range products as the consumers are looking for value (additional biscuits from mid-range compared to premium products) with limited financial resources in the pandemic. However, the company’s long-term focus is premiumization across the product ranges.
Revenue of Battery unit decreased by 12.8% from Tk 465.0 Mn in FY 19-20 to Tk 405.7 Mn in FY 20-21. In terms of volume, the company sold 55.2 Mn in FY 20-21 compared to 55.1 Mn in same period last year. Dry-cell battery sales represented about 2.3% of the total sales of the company.
Profit
Profit only increased by 0.6% in FY 20-21 mainly due to lower gross profit margin. Due to the pandemic gross profit margin decreased to 29.3% in FY 20-21 from 31.9% in FY 19-20. Gross profit margin declined mainly due to rising raw materials/input costs and supply chain disruptions. Raw materials of Biscuit and Bakery manufacturing – Flour, Sugar and Edible Oil price increased during FY 20-21. Due to the pandemic global supply chain was disrupted which resulted higher freight costs. Hence the cost was also passed on to the raw materials of Biscuit and Bakery.
A change in sales mix driven by downtrading was another reason for the decline in gross profit margin. Although the company still has long term plan toward premiumization across the product ranges, the company decided to focus on volume as consumers preferred mid-range products which have additional number of biscuits compared to premium products.
Cost of Goods Sold increased by 17.8% as raw materials, packing materials & factory overhead increased. Factory overhead mainly increased due to increase in salary & wages, factory maintenance (including additional Covid-19 processes and standards) and fuel expenses.
Net profit margin decreased to 11.3% in FY 20-21 from 12.7% in FY 19-20.
Future Ahead
In terms of revenue, Olympic Industries showed solid growth despite the pandemic. Due to the pandemic people mostly concentrated on necessity purchases due to uncertain future. It is a great sign that consumers now see biscuit and bakery items as necessities. However, the growth in revenue was not reflected in profit as input and freight cost have risen exponentially due to covid. It is expected that the cost of the raw materials will normalize when Covid subsides. But the timing of normalization of price is still uncertain due to uprise of Omicron variant.
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