BackUnited Breweries Q2 profit more than triples to Rs94 crore
United Breweries outpaces the beer industry with 11% volume growth in September quarter
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Bengaluru: Net profit at United Breweries Ltd, India’s largest beer maker, more than tripled in July-September as the company recorded volume growth in most large markets during the period.
The maker of Kingfisher beer saw second quarter net profit zoom 246.91% to Rs93.84 crore versus Rs27.05 crore in the same period last year. Revenue was up 24.49% at Rs2,739.24 crore.
UB’s sales volumes grew 11% during the quarter, faster than the alcoholic beverage industry’s 5% growth rate, the firm said in a filing with the BSE on Wednesday. In the north, the company recorded significant volume growth in Delhi, Uttar Pradesh and Rajasthan. The south performed well as a whole, driven by Andhra Pradesh, Telangana, Tamil Nadu and Karnataka, UB said. This led to market share gains for the firm in the south. Growth in the east was driven by Odisha, it added.
But some significant markets still haven’t recovered from the Supreme Court’s decision to ban all alcohol sales near state and national highways. While the apex court clarified in August its ban was not aimed at stretches that fall within city limits, the order did hurt sales in the first two quarters of 2017-18 for firms across the industry.
Volume sales in Mumbai and Goa grew during the July-September quarter but the rest of Maharashtra is yet to recover from the impact of the highway ban, UB said. Kerala also continues to be affected by the ban. The industry was down almost 15% in Maharashtra, excluding Mumbai, and nearly 20% in Kerala during the quarter, it added. The Maharashtra government’s 23 October decision to increase excise duty on beer by 17% will not help matters either. Beer firms, including UB, have already said that the hike in duties will negatively impact the business going ahead, especially considering Maharashtra is among the top states for liquor consumption.
The roll-out of the goods and services tax (GST) on 1 July was expected to throw another spanner in the works for liquor firms. While liquor is not included under the purview of GST, several raw materials used by alcoholic beverage companies do fall under the new tax regime. But liquor firms cannot claim input credits and thus offset those input cost increases like firms in other sectors.
“Whilst the company has been able to mitigate part of the negative effects of GST, cost pressure on input materials and services is still incurred," UB said in a statement on Wednesday.
The company also said it had property, plant and equipment worth Rs224.37 crore, gross inventories of Rs2.95 crore, gross trade receivables of Rs24.48 crore at its units in prohibition-bound Bihar as of 30 September. The management believes that the carrying amount of those does not exceed their recoverable amount and is confident that it can use those assets either for a new product line for non-alcoholic beverages in Bihar or for manufacturing in other states. It has made a provision of Rs10.01 crore against those and said no other adjustment has been considered necessary in this regard.
Last April, the Bihar government announced a ban on the sale and consumption of alcohol in the state. While Bihar initially said it would allow production for export to other states, after a notification issued this January, it failed to renew existing brewery licenses for 2017-18.
UB has received permission from the government to manufacture non-alcoholic beverages at its existing manufacturing facility in Bihar and has initiated the process to do so, it said on Wednesday.
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