United Breweries reported its Q2 results, noting a 3% decline in overall volume due to a strong monsoon. Despite this, the premium segment grew by 17%. Net sales decreased by 3%, with YTD net sales up by 7%. Gross profit margin stood at 42.8% in Q2. The company continues to invest in its brands and is accelerating its productivity agenda to drive sustainable growth.
Financial Performance Overview
United Breweries experienced a 3% decline in overall volume during Q2, primarily due to a stronger-than-usual monsoon season. However, the premium segment demonstrated robust growth, increasing by 17%. Despite volume declines, the company gained market share. Net sales for Q2 decreased by 3%, influenced by negative state and source mix, yet year-to-date net sales grew by 7%.
Profitability and Investments
The gross profit margin for Q2 was 42.8%, a decrease of 104 BPS compared to the previous year. The year-to-date gross profit margin was 42.6%, down 76 BPS year-over-year. The company continued to invest in its brands, with a 22% increase in brand investments. This strategy, combined with operating deleverage from volume decline, resulted in a 55% decrease in EBIT.
Segment Performance and Strategic Initiatives
Premium volume grew by 17% during the quarter, bringing the half-year growth rate to 33%. Key drivers in the premium segment include Kingfisher Ultra, Kingfisher Ultra Max, and Heineken® Silver. The company launched London Pilsner in Orissa and Kalyani Black Label in West Bengal.
Operational Efficiency and Future Outlook
United Breweries invested significantly in capital expenditure during the quarter, totaling Rs. 293 Cr, primarily for a new greenfield project in Uttar Pradesh and commercial capex. In line with network optimization efforts, the Mangalore unit was closed earlier in the year. The company remains optimistic about the industry’s long-term growth potential, driven by increasing disposable income, favorable demographics, and premiumization.
Legal and Regulatory Matters
The company’s appeal against the Competition Commission of India (CCI) order remains before the Supreme Court. A deposit of Rs. 17,707 Lakhs has been made relating to this matter. Additionally, a property in Bihar, valued at Rs. 6,014 Lakhs, is subject to legal proceedings regarding land lease cancellation.
Source: BSE
