 "United Breweries hits 52-week low as high RM prices hurt Q4FY23 margins")
Shares of liquor-maker United Breweries tumbled over 6 per cent to hit 52-week low of Rs 1,342 per share in Friday’s intra-day trade, after commodity cost inflation weighed January-March quarter’s (Q4FY23) net profit, down 94.03 per cent year-on-year (YoY) to Rs 9.7 crore.
So far this calendar year (CY23), the stock has crashed over 20 per cent, as against 0.1 per cent rise in the S&P BSE Sensex.
In Q4FY23, the beverage major clocked 11.3 per cent growth in revenue from operations to Rs 4,081.01 crore, whereas total expenses climbed nearly 18 per cent, following a 32 per cent rise in raw material costs.
Going ahead, the management asserted that price hikes taken across multiple states would augur revenue.
Inflation in barely, and packaging materials, however, contracted gross margins by 1,010 basis points (bps) YoY to 38.6 per cent in the March quarter.
The management believes that inflationary pressure on the overall cost base would continue to linger in the near-term as well.
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“The company will seek appropriate action to further mitigate the impact. UBL continues to remain optimistic on the long-term growth potential of the industry, driven by increasing disposable income, favorable demographics, and premiumisation,” the company added.
Analysts at Elara Capital, further, said that with prices of glass, and extra-neutral alcohol (ENA) inching up every quarter, India’s alcohol-beverage segment has been battling high raw material prices, thereby disrupting margin profile.
“Though price of paper, and other packaging materials remain neutral, about 65-70% of raw material cost consists of ENA and glass prices; hence gross margin of companies have been adversely affected this quarter,” they added in a result preview note.
Volumes, meanwhile, grew 3 per cent YoY in Q4FY23 driven by Telangana, Rajasthan, West Bengal, and Maharashtra. Going forward, the company expects continued volume growth, however, laid emphasis on the need of capex investments. On a year-to-date (YTD) capex expenditure amounted to Rs 156 crore for the company.