Margins shrink as milk costs surge, but strong value-added product growth and price hikes support topline expansion
Heritage Foods reported a 19.8 per cent year-on-year decline in net profit for the third quarter of FY26 at Rs 34.5 crore, compared with Rs 43 crore in the year-ago period, as higher input costs and industry-wide milk shortages weighed on margins.
Revenue, however, rose 8.2 per cent year-on-year to Rs 1,119.1 crore from Rs 1,033.9 crore, supported by steady growth in value-added products (VAP) and calibrated price hikes.
Operating performance remained under pressure during the quarter. Ebitda fell 15 per cent year-on-year to Rs 63 crore from Rs 74 crore, while Ebitda margin narrowed to 5.6 per cent from 7.2 per cent a year earlier. The company said rising milk procurement prices and tight butter supply conditions significantly impacted profitability.
Value-added Products Drive Frowth
Heritage’s consumer dairy business, excluding bulk fat sales, grew 13 per cent year-on-year, led by strong traction in value-added products. VAP revenue increased 13.8 per cent year-on-year despite adverse weather conditions, with consumer fats such as ghee and butter rising 22.6 per cent. The expanded VAP portfolio contributed 38.4 per cent of overall revenue during the quarter, up from 33.5 per cent a year ago.
Volume growth was led by curd, which grew 6 per cent and crossed 400 tonnes per day for the first time in a third quarter. Paneer volumes surged 25 per cent, while ice creams grew 18 per cent. In the drinkables segment, lassi volumes rose 29 per cent and milkshakes jumped 36 per cent year-on-year.
The company said weather-sensitive categories such as ice creams and drinkables recovered strongly despite higher-than-normal rainfall and extended cold spells, aided by deeper market execution and sustained consumer engagement.
Pricing Offsets Part Of Cost Pressure
A calibrated 4.9 per cent price hike during the year, along with a richer product mix, helped offset rising input costs while sustaining blended volume growth of around 7 per cent. Net milk realisation rose Rs 2.67 per litre year-on-year, a 4.9 per cent increase, reflecting resilient demand and brand strength.
Milk sales volumes grew 2.1 per cent year-on-year to 11.94 lakh litres per day (LLPD), while the average selling price increased to Rs 57.31 per litre.
Procurement Challenges Weigh
For the first time in several years, milk procurement volumes declined on a year-to-date basis. Average procurement stood at 16.86 LLPD in the first nine months of FY26, down 0.82 per cent year-on-year, with a sharp 9 per cent decline in Q3 to 16.73 LLPD due to climatic disruptions affecting milk production. However, volumes showed sequential recovery of around 4 per cent quarter-on-quarter.
Procurement prices rose sharply across regions amid milk and commodity shortages, pushing the average landed raw milk cost up about 9 per cent year-on-year and 6 per cent quarter-on-quarter to ₹45.55 per litre. Tight butter supply in the domestic market further added to margin pressure.
Subsidiary Performance
Heritage Nutrivet, the company’s wholly owned subsidiary, posted a 27 per cent year-on-year rise in revenue to Rs 64.5 crore. Profit before tax rose to Rs 5.5 crore, reflecting improved operational performance.
During the quarter, the company also recognised a one-time employee benefit provision following the notification of the four Labour Codes. The additional provision amounted to Rs 2.78 crore on a consolidated basis and was booked as an employee benefit expense.
To strengthen its VAP portfolio, Heritage Foods is adding capacity in high-margin categories. Trial production has begun at the new Shamirpet ice cream plant, with commercial production expected in Q4 FY26. A new flavoured milk plant is also slated for commissioning in the same quarter, which the company expects to support growth in the upcoming summer season and beyond.
