Diary companies' gross margins to improve sequentially in FY24, says new report

economictimes.indiatimes.com:

dairy companies will improve sequentially in FY24, according to rating agency ICRA. A report released by ICRA said that domestic milk supply was impacted in FY2023 due to the incidence of Lumpy Skin Disease (LSD) in cattle and its impact on the milk yields during the flush season, thus resulting in a demand-supply gap as demand remained steady. ICRA expects healthy improvement in milk supply by H2 FY2024 as these factors are likely to ease.

Raw milk demand remained buoyant in FY2023 with both liquid milk and value-added dairy product (VADP) segments witnessing a healthy volume growth. There is 8-10% increase in liquid milk sales volume despite multiple price hikes undertaken by dairy companies, whereas there is 18-22% increase in VADP volumes; VADPs continued to witness strong volumes, which along with price increases, resulted in revenue growth of 28-32% in FY2023. The demand for VADPs is expected to remain healthy owing to growing disposable incomes and increasing demand from the HoRECA segment.

The demand for liquid milk is expected to remain robust due to its essential nature. ICRA sample set witnessed 15-18% growth, a double digit increase, in raw milk procurement in milk procurement volumes in FY2023 to meet growing demand for both liquid milk and VADPs. Fodder and cattle feed prices increased in FY2023 due to erratic weather conditions.

With delayed onset of monsoons, inadequate and uneven rainfall through June 2023 and consequent YoY lag in kharif sowing across most crops, fodder and feed prices remained firm. However, pick-up in monsoon over the last few weeks is likely to accelerate kharif sowing pace, which would determine price corrections. Nevertheless, ICRA expects green fodder availability to be adequate