United Breweries posts Q2 loss of Rs.18.57 cr

United Breweries, which controls more than half of India’s beer market, said volumes fell 2% in the first half of the year. Photo: Mint

Bangalore: United Breweries Ltd, the maker of Kingfisher beer, swung to a loss in the second quarter because of a surprise drop in sales and higher sales promotion costs.

United Breweries on Thursday reported a loss of Rs.18.57 crore for the quarter ended 30 September, compared with a profit of Rs.34.20 crore in the year-ago period.

The company’s quarterly sales fell, for the first time in several years, by 1.5% to Rs.845.38 crore due to a wetter-than-usual monsoon, price increases and continued market share losses in Tamil Nadu, where the government is promoting local brands ahead of other brewers.

United Breweries, which controls more than half of India’s beer market, said volumes fell 2% in the first half of the year. The company, however, said that it had maintained its market share despite losing ground in Tamil Nadu.

“These are a pretty dismal set of numbers,” said Nitin Mathur, an analyst at Espirito Santo Securities India Pvt. Ltd.

“Price increases in the current economic environment were bound to hit demand and on top of that, the monsoon was prolonged—it’s clearly showed in their results. I don’t expect much of an improvement in the second half of the year as well. The market will drastically cut its (profit) estimates on the company.”

This year, sales growth for India’s brewers, long used to volume increases of over 10%, has dropped significantly. In the year ended March, brewers sold 265-270 million cases (of 7.8 litres each) of beer in India.

In October, India’s second-largest brewer SabMiller India Ltd, the maker of Foster’s and Haywards beer, also reported a drop in beer volumes for the first time in over three years and said revenue for the six months to 30 September rose just 1%.

United Breweries and Sabmiller are also facing increased competition from Carlsberg which has launched successful products such as Tuborg and its namesake beer over the past few years.

Mint reported on 27 October that India’s brewers have increased spending on promotions to stimulate weak demand.

Sales promotion expenses at United Breweries rose nearly 18% to Rs.176.91 crore in the quarter.

Shares of Vijay Mallya-promoted United Breweries fell 5.26% to Rs.821.50 on Thursday on the BSE.

PINTU KUMAR OJHA 

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