This Rs 3,000 crore milk producer says there will be more price hikes

Dodla Dairy is looking at more price hikes, said Dodla Sunil Reddy, MD of the company, in an interview with CNBC-TV18.

“On litre terms, we will have to look at a price hike of Rs 1-2 depending on the product classification,” he said.

Dodla Dairy took a price increase of Rs 5 per litre. “The price increase has been substantially larger, almost close to Rs 5 per litre,” he said.

The company faced a double whammy this year because of the increased procurement price of milk and because of the Russia-Ukraine war as there was an impact on fuel and plastic.

“For us, the impact on fuel and plastic has been substantially higher than the previous years. So we have considered the impact of that and we have taken up price increase. Normally, in seasonal terms, the procurement prices should come down and that should improve margins. If the volume of milk doesn’t pick up and procurement prices don’t come down, we will have to pass on the prices to the consumers,” he explained.

Dodla Dairy has been able to pass on the input cost price of other expenses that came up from the fuel and plastic. “Now, we have to consider about the procurement and if it doesn’t get corrected and continues to remain strong, we will have to take another price increase to offset that,” he said.

This comes even as milk procurement prices have cooled off in the last 45 days, according to a recent report from IIFL dated August 2, 2022.

The wholesale price of milk, the pan-India average, has gone up to nearly Rs 50 a litre from less than Rs 40 in March 2018, according to data from ICICI Securities.

Source: Department of consumer prices, I-Sec research

The company reported its quarter one earnings with margins coming in at 6.3 percent, profit after tax (PAT) has seen a decline of 31 percent on a YoY basis.

He expects to see 20-25 percent higher than normal compounded annual growth rate (CAGR) growth. “Historically, we are at 15 percent growth in terms of value. We will be growing 20-25 percent on that,” he said.

In terms of margins, he mentioned, “Earlier we were at the 10 percent margin levels. We will come close to those in the coming quarters.”