United Breweries Shares Hit 52-Week Low as High RM Prices Hurt Margins in Q4FY23

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Shares of liquor maker United Breweries fell more than 6% to Rs 1,342 per share for 52 weeks in intraday trade on Friday after rising commodity costs dragged down its net profit in the January-March quarter (Q4FY23) by 94.03%. The low year-on-year (YoY) reached Rs 9.7 crore.

The stock has fallen more than 20% so far this calendar year (CY23), compared with a 0.1% gain for the S&P BSE Sensex.

In Q4FY23, the beverage major’s operating income rose 11.3% to Rs 4,081.01 crore, while total expenses rose by nearly 18% after a 32% rise in raw material costs.

Looking ahead, management asserts that price increases in several states will bode well for revenue.

However, with little inflation, gross margins on packaging materials fell 1,010 basis points (bps) year-on-year to 38.6% in the March quarter.

Management believes that inflationary pressures on the overall cost base will also continue in the near term.

“The company will take appropriate actions to mitigate the impact further. UBL continues to be optimistic about the industry’s long-term growth potential, driven by rising disposable income, favourable demographics and premiumisation,” it added.

Meanwhile, sales in Q4FY23 were up 3% YoY, driven by Telangana, Rajasthan, West Bengal and Maharashtra. Looking ahead, the company expects volume growth to continue but with a focus on the need for capital expenditure investments. The year-to-date (YTD) capex of the company was Rs 156 crore.

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