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Indian woes hammer United Breweries in FY 2017 - results

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  • Full-year pre-tax sales increase 5.7% to INR102.8bn (US$1.6bn), net sales down 2.5%
  • Net profits in 12 months to end of March slide 23% to INR2.3bn
  • Operating profits fall similarly, by 24% to INR2.24bn
  • Fourth-quarter pre-tax sales rise 2.3% to INR25.6bn
  • Net profits in final three months of fiscal-2017 tumble by 87% to INR67.3m
  • Quarterly operating profits down 84% to INR83m

India's beer market has suffered hugely in the three months to the end of March, according to United Breweries, which posted its full-year results yesterday.

United Breweries is struggling with an unprecedented market environment in India

United Breweries is struggling with an unprecedented market environment in India

United  Breweries (UBL), which dominates the beer category in its domestic market, reported a near-6% increase in pre-tax sales in the 12 months to the end of March. While net details were not released, the company said its net sales in the year "declined in line with volumes", which were down 2.5%. Both net and operating profits fell in fiscal-2017, by 23% and 24%, respectively.

In its results announcement yesterday, UBL flagged that the beer industry as a whole suffered its "sharpest ever fall" in the group's fiscal fourth quarter. In the three months to the end of March, the brewer's pre-tax sales inched up 2.7%, with net profits plunging 87%.

India's alcoholic beverages sectors have had a torrid time recently, with the introduction of prohibition in Bihar state last April being followed two months later by the closure of 500 liquor stores in Tamil Nadu. The demonetisation legislation introduced in November also hit the industry hard, before a ban on alcohol sales within 500 metres of all national and state highways last month closed out a miserable year in the country.

How will India's highway liquor ban affect alcohol sales? - Analysis

On the highway ban, the brewer said: "We expect the impact of this ban to be most significant in the first two quarters of this fiscal year. The magnitude of the impact on sales volume will depend on the extent of potential mitigating actions by State Governments, including the options offered to outlets to relocate to an alternative location or efforts to denotify certain State highways, which remains uncertain."

UBL also said in its statement that it has complied with an order from the country's Securities & Exchange Board to "restrain" its chairman, Vijay Mallya, from "holding position as director or key managerial person of any listed company". No-one was immediately available at UB to confirm Mallya is no longer the company's chairman. Mallya was bought out of the chairman role at sister company United Spirits by majority stakeholder Diageo last year. He is wanted in the country for alleged diversion of funds to another company in the UB Group empire, Kingfisher Airlines.

To read United Breweries' official release statement, click here.


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