Heritage Foods Q4 FY26 earnings call

Heritage Foods reported a consolidated revenue of INR 11,576 million in Q4 FY26, marking a 10% year-on-year growth. The full fiscal year 2026 revenue reached INR 45,260 million, surpassing the INR 45,000 million milestone. Despite strong top-line growth, profitability was impacted by high input costs, with EBITDA at INR 522 million (4.5% margin) and PAT at INR 230 million (2.1% margin) for the quarter.

Value-added products continued to be a key growth driver, with revenues increasing 18% year-on-year in Q4 FY26. VAP's contribution to overall revenues rose to 35.5% in Q4 FY26, up from 32.5% in the corresponding period last year, reflecting a strategic shift towards premiumization. The company aims to increase VAP contribution by 2-2.5% year-on-year, targeting 50% of total revenue within the next four to five years.

Milk procurement volumes declined 7% year-on-year to 16.38 lakh liters per day in Q4, reflecting persistent supply constraints across the industry. Average milk procurement prices increased sharply by 8% year-on-year to INR 46.67 paisa per liter in Q4, and 7% for the full year to INR 44.72 per liter. While cow milk flush has started and volumes are increasing, prices have not yet softened significantly, indicating continued pressure on input costs.

The company invested approximately INR 380 crores in CAPEX during FY26, with about INR 300 crores allocated to plant production capacity expansion. Key investments include a new Greenfield ice cream facility in Hyderabad, which has now moved into production, and a flavored milk plant in Tirupati, nearing full operationalization. Additionally, curd production capacity was expanded by 50 tons per day, and INR 20 crores was invested in milk procurement and chilling centers. For FY27, CAPEX is expected to be around INR 200 crores.

Heritage Foods' presence in North and Mumbai regions currently contributes less than 10% of total revenue and remains unprofitable. Management anticipates seeing some improvement and potentially reaching breakeven in at least one of these regions during FY27. The company's strategy is to deepen its presence in existing markets rather than spreading thin, aiming for strong positions in value-added product categories nationally and in specific locations.

Receivables increased from INR 37.52 crores in the previous year to INR 64.81 crores at the end of FY26, primarily due to the growing salience of organized trade channels. However, this figure reduced to INR 51.67 crores by April 30, 2026, with management noting that these are large listed entities and the average debtor days are not more than three weeks, indicating no significant credit risk.

The company's EBITDA margin for FY26 was 5.9%, down from 8% last year, reflecting a 2-2.1% shrinkage. Management highlighted the cyclicality of the milk business, with median EBITDA typically around 7%. The goal is to push the median towards a high single digit of 9%, with expectations of 6.5-7% in a challenging year and 10-11% in a good year, driven by increased VAP contribution and operating leverage.

Heritage Foods acquired a majority stake in Peanutbutter and Jelly Private Limited (Get-A-Way ice cream) in January, involving a purchase price allocation of INR 9 crores and an agreement to acquire an additional 20%. This acquisition aligns with the strategy to strengthen presence in high-growth categories. The company is also exploring opportunities to further monetize whey byproduct from paneer production, including potential entry into whey powder.