The latest hike in retail milk prices will limit the fall in profitability of the organised dairy sector this financial year, rating agency CRISIL Ratings said in a report on Tuesday. The rise in profitability is expected despite a higher than anticipated rise in procurement prices, and transportation and packaging costs.
“Despite lower profitability, comfortable balance sheets and better working capital management will keep the credit profiles of players stable,” it said. “Milk procurement prices have shot up 8-10 per cent in the past six months because of lower-than-expected milk collection — on account of cattle diseases in some of the major milk-producing states — and high prices of cattle feed,” said Anand Kulkarni, Director at CRISIL Ratings.
Additionally, the surge in crude price has translated into a significant increase in transport and packaging costs, Kulkarni said. “This necessitated a second price hike in the past six months,” the director said adding that he doesn’t anticipate any more price hikes as an expected improvement in milk collection and softening input prices will support profitability in the second half of the fiscal.
Last week, Mother Dairy and Amul hiked prices of milk by Rs 2 per litre due to rising input costs. “Mother Dairy is compelled to raise its liquid milk prices by Rs. 2/litre with effect from August 17, 2022. The new prices will be applicable for all milk variants,” it said while raising the rates.
The increase of Rs 2 per litre, Amul said, translates into a 4 per cent increase in maximum retail price (MRP) which is lower than average food inflation.
