India: United Breweries doesn’t expect normalcy to be achieved during current financial year

With coronavirus pandemic impacting its operations, United Breweries Ltd (UBL) on August 5 said it expects normalcy to be achieved only after the current financial year.

In a regulatory filing, disclosing the impact of the pandemic on its operations, the company said it expects sales and demand of its main brands to be under pressure due to closure of key consumption points, including bars, and increased duties and taxes.

The company's breweries, which were shut from March 23, 2020 due to lockdown, resumed manufacturing and supply operations from May 2020 following guidelines from Centre, states and local authorities, UBL said in the filing.

"The company is running its breweries on reduced capacity to fulfil available demand for its brands and cater to the market.

"These are early days and we are cognizant of the impact that the pandemic would have on its operations during the current financial year. However, it expects normalcy to be achieved only after the current financial year," it said.

On the impact of health crisis on its profitability, UBL said assessed profit impact for March 2020 comprises lost sales volumes estimated at Rs 87 crore and provision for obsolete stocks of Rs 16 crore.

Direct impact of COVID is therefore estimated at Rs 103 crore for FY20.

The company has put in place additional financing headroom since the start of the pandemic to ensure that sufficient access to financial resources is in place under various business scenarios, it said.

On future impact on profitability, the company said it "will commensurate with sale and demand for the company's brands which will be under pressure due to closure of key consumption points including bars and increased duties and taxes".

The company sells beer under brands including Kingfisher, Heineken, Zingaro, Affligem and Edelweiss, among others.

As a fall out of the COVID-19 induced lockdown, the company said various state governments have imposed measures negatively impacting the industry.

"For example, Andhra Pradesh imposed additional taxes thereby increasing consumer prices by 75 per cent, Delhi increased sales tax from 20 per cent to 25 per cent impacting increase in maximum retail price (MRP) by Rs 5 per bottle," it said.

Similarly in Rajasthan, additional excise duty increased by 10 per cent and Epidemic Surcharge of Rs 20 per bottle was imposed, which resulted in increase in MRP by Rs 30 per bottle, Uttar Pradesh imposed COVID Cess at Rs 20 per bottle.

West Bengal imposed Retail Sales Tax of 30 per cent thereby pushing consumer price by Rs 45 per bottle of beer and Telangana levied a Special Retail Cess of Rs 30 per bottle of beer, the company said.

This was followed by Puducherry where there was price increase on certain brands, UBL added.

"Beer companies are reeling under pressure as the lockdown has come at the onset of the summer which comprises the bulk of sales. All these increases are likely to be a dampener, next to partial or full closure of bars and shops in an environment of overall lower economic growth and reduced consumer confidence," it said.

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