Earnings Report /
Bangladesh

Olympic Industries: Q1 FY23: c13% yoy earnings growth driven by c38% revenue growth

  • The c38% growth in top-line revenue was the main driver of yoy earnings growth.

  • The scale of growth in top-line revenue is attributable to the company’s ‘Shrinkflation’ strategy.

  • Gross margin declined by 198bps yoy but improved by 543bps qoq.

Shopnil Paul
Shopnil Paul

Research Associate

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IDLC Securities
21 November 2022
Published byIDLC Securities
  • 13% yoy earnings growth in Q1 FY23. The reported EPS in the quarter was BDT 2.33 vs BDT 2.06 in Q1 FY22. The c38% growth in top-line revenue was the main driver of yoy earnings growth.

  • The sales revenue increased by c38% yoy in Q1 FY23. The scale of growth in top-line revenue is attributable to the company’s ‘Shrinkflation’ strategy i.e. reducing the quantity of the product while keeping price the same as before.

  • The ‘Shrinkflation’ strategy came up against the backdrop of the failure of price hike strategy in the industry. In the second half of CY2021, the biscuit manufacturer’s association decided to increase the price to protect margin as the price of wheat was soaring up. The collective decision, however, did not work as the major biscuit manufacturers saw they are losing their market shares. They have resorted to quantity discount tactic by reducing biscuit weight by 20-25% at the same price point.

  • Gross margin declined by 198bps yoy but improved by 543bps qoq. Any new development in Russia-Ukraine war heavily impacts the margin of the company as these two countries contribute to at least 1/4th of the world’s wheat supply.