United Breweries Shares Slump Despite an 8x Profits Jump

United Breweries Limited (UBL) is a leading company in the breweries and distilleries industry that operates in the production and distribution of beer and non-alcoholic drinks. The company markets its offerings primarily under renowned labels like Kingfisher and Heineken.

Financial Performance 

United Breweries Limited (UBL) reported a consolidated net profit of Rs 81.55 crore for the March quarter of FY24, marking an eightfold increase. The company’s revenue amounted to Rs.4,788.68 crore, indicating a 17.3% rise. During the quarter, EBITDA reached Rs.142.9 crore, with EBITDA margins improving by 370 basis points year-on-year to 6.7%. Additionally, the board proposed a dividend of Rs 10 per share, up from Rs 7.5 per share in the previous year, reflecting the company’s strong financial performance.

Why the shift in results?

The surge in volume during Q4, increasing by 10.9%, was predominantly driven by the South and East regions. Particularly by 21% growth in the premium segment, fueled by stellar performances from Kingfisher Ultra & Kingfisher Ultra Max. Also, the company introduced Queenfisher to commemorate International Women’s Day and London Pilsner Strong Beer in Karnataka. Despite a slightly lower full-year gross profit margin compared to the previous year, Q4 demonstrated improvement.

Reasons for Shift:

1. Market Dynamics: The increase in volume, particularly in the premium segment, reflects changing consumer preferences and a growing market demand, particularly in the South and East regions.
2. Product Innovation: Introducing Queenfisher and London Pilsner Strong Beer in specific markets indicates innovation and niche market opportunities.
3. Strategic Initiatives: The company’s focus on brand enhancement and cost management underscores initiatives aimed at optimizing operational efficiency and maximizing profitability.
4. Investment in Future Growth: The significant capital expenditure (Capex) investments totaling Rs 190 crore for the year, primarily directed towards enhancing the supply chain, highlight United Breweries’  future growth and expansion plans.
5. Key Management Appointment: The board of directors’ approval of Mr. Jorn Kersten as the Chief Financial Officer and Key Managerial Personnel, effective from August 1, 2024, reflects the company’s decision-making to strengthen its leadership team and drive financial management.

Conclusion: In conclusion, despite potential ongoing inflationary pressures, the company maintains a positive outlook on the industry’s future growth prospects, buoyed by increasing disposable income, favorable demographics, and the trend towards premium quality offerings. The results reported were better on a YoY basis but were below the market expectations. Hence, the share prices of United Breweries have fallen after the results and the stock is currently trading down by -1.21% from its previous day closing at Rs.1980.90 a piece.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.