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The net sales for June 2017 quarter have grown by 7% to Rs 1674.21 crore. Volume was flat. The company gain market share by 1.5%. The beer industry declined by 1%. Both the industry and the company saw volume growth in all regions apart from the West, with the most negatively impacted markets from the highway ban Kerala in the South and Maharashtra (excluding Mumbai) in the West. The increase in net revenue was primarily due to price increases taken in several open markets, as well as more favorable state and brand mix. OPM has increased by 40 bps to 19%. The net profit inclined by 10% to Rs 161.89 crore.
Company Performance
Standalone performance for quarter ended June 2017
The net sales have grown by 7% to Rs 1674.21 crore. Volume was flat. The company gain market share by 1.5%. The beer industry declined by 1%. Both the industry and the company saw volume growth in all regions apart from the West, with the most negatively impacted markets from the highway ban Kerala in the South and Maharashtra (excluding Mumbai) in the West.
The increase in net revenue was primarily due to price increases taken in several open markets, as well as more favorable state and brand mix.
The company gained market share in North and South. In North, the company saw significant volume growth in all key markets Rajasthan, UP, Delhi, Haryana and Uttaranchal. Volume growth in the South was driven by Karnataka, Andhra Pradesh and Telangana, despite a sharp decline in Kerala. The company gained market share in Karnataka, Andhra Pradesh and Tamil Nadu. Volume growth in the East was driven primarily by Orissa, whilst the company saw volume decline in West Bengal amd Jharkhand. In West the company saw volume growth in Mumbai and Goa, with volume decline in the rest of Maharashtra.
OPM has increased by 40 bps to 19% due to rise in raw material cost and other expenditure to adjusted net sales. As a result, the operating profit has increased by 9% to Rs 318.35 crore.
Variable cost increased, with barley prices still high similar to previous year's levels. The prices of sugar and rice have also yet to soften.
Other income has declined by 54% to Rs 6.26 crore. The interest paid declined by 4% to Rs 14.20 crore. Avg. debt levels was similar to Q1 FY17 and lower interest costs were the result of lower short term interest rates. The depreciation increased by 2% to Rs 64.85 crore. The profit before tax has increased by 9% to Rs 245.56 crore.
The tax outgo increased by 6% to Rs 83.67 crore. Tax rate declined from 34.94% to 34.07%. The net profit inclined by 10% to Rs 161.89 crore.
Standalone performance for year ended March 2017
The net sales decreased by 2% to Rs 4734.12 crore. Beer industry saw lower volume as a result of steep duty increases in multiple states, the impact of demonetization and the impact of the anticipated cancellation of liquor licenses within 500 meters of national and state highways from April. The company volume declined by 2.5% vs industry fall of 5%.
The company gained market share in North, South and the East, whilst it held market share in the West.
Growth in the Southern region was driven by Andhra Pradesh and Telangana where the company gained market share, however Karnataka saw a drop in volume with the company holding market share. In Tamil Nadu supplies resumed in March 2017, after having received no orders from state corporation TASMAC for about 6 months.
Growth in the East was driven by the West Bengal, Orissa and Jharkhand markets, however prohibition in Bihar resulted in a complete stoppage of the industry during the year.
In the west, the industry declined across markets with the company holding shares.
OPM has decreased by 80 bps to 13.5% due to rise in raw material cost to adjusted net sales. As a result, the operating profit has decreased by 7% to Rs 641.17 crore.
Duties as a percentage of revenue were 54% vs 50% last year. The increase in duties, combined with the volume decline in some of the larger markets as well as upward pressure on the input costs resulted in a decrease in operating profit.
Other income has declined by 40% to Rs 51.60 crore. The interest paid declined by 28% to Rs 58.65 crore due to better working capital management. The depreciation increased by 18% to Rs 286.95 crore. The profit before tax has decreased by 23% to Rs 347.17 crore.
The tax outgo decreased by 24% to Rs 117.84 crore. Tax rate declined from 34.31% to 33.94%. The net profit declined by 23% to Rs 229.33 crore.
Other Developments
The extent of the impact on the beer industry from the ban on sale of liquor on highway effective 1 April 2017 will be determined over the next 2 quarters. There has been some relief from a Supreme Court clarification that states can de-notify highways passing through city limits, such that the ban will not apply to outlets located within city limits.
With GST implementation on 1 July 2017, the company is facing increased input prices. This is due to alcohol being excluded from GST, with the result that taxes paid on inputs are not available as credits. The company has launched several initiatives to mitigate the negative impact on this and to control costs. The net impact of the GST related input prices increase will be seen over the next few quarters.
Valuation
The total promoters holding in the company stand at 73.87%.
The scrip is trading around Rs 815 at BSE.
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