UB swings to Rs 19-cr loss on low volumes

United Breweries Ltd has recorded a net loss for the quarter ended September, owing to significantly high expenses. The early onset of the monsoon, which resulted in a drop in beer demand and higher inventories, also contributed to the loss.

For the September quarter, the beer-making arm of the Vijay Mallya-led UB Group, in which global beer major Heineken has 37.6 per cent stake, posted a net loss of Rs 18.57 crore, compared with a profit of Rs 34 crore in the corresponding period last year. During the September quarter, the company also recorded an operating loss of Rs 9 crore, against an operating profit of Rs 66.83 crore in the year-ago period. Revenues fell four per cent to Rs 752 crore, as volumes dropped.

Price increases in a few states helped offset the adverse impact of rising input costs and lower volumes, the company said.

“Historically, volumes have suffered following price increases. Combined with the economic downturn, beer volumes are likely to remain under pressure,” said Vivek Veda and Nitin Mathur, analysts at Espirito Santo Securities. “We believe it (the company) is going to face tough competition, which in turn, would limit its ability to pass on price increases.”

During the September quarter, the company struggled to tackle rising expenses. Expenses soared eight per cent to Rs 855 crore from Rs 791 crore in the year-ago period. Sales promotion spend rose 17 per cent to Rs 176 crore from Rs 150 crore in the September quarter of 2012. Inventory costs stood at Rs 108 crore.

The company said during the first half of the year, a new law in Maharashtra that mandated the use of new bottles led to a rise of Rs 46 crore in input costs. The Maharashtra government has now withdrawn the law.

TROUBLED TIMES

* The company’s promoter and chairman Vijay Mallya’s stake pledge has increased to 32.58% till date from 27.2% at the end of Q1 and 11.84% at the end of Q2 last year - indicating as much as 87% of his total holding in UBL has been pledged

* Dutch-brewer Heineken has a 37.57 per cent stake in the firm at the end of the second-quarter, according the BSE