AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

Pakistan’s oldest-running enterprise continues its run of top line growth. But converting such a gain into improved profit margins is another matter. As per the latest results announced by Murree Brewery Company Limited (PSX: MUREB) yesterday, net profits for the nine month period ended March 31, 2017 were down by 22 percent year-on-year, as manufacturing costs slipped.

For the uninitiated, the leading brewery – which is also a maker and marketer of juices, marmalades, and sauces under the Tops Foods brands, besides a seller of Sparkletts mineral water as well – had doubled its net profits between FY11 and FY16 (Rs1.15 bn).Mu

During that period, such profitable growth had come about on the back of a 15 percent average growth in net revenues per annum. Besides, MUREB also managed to achieve a checked expansion in its manufacturing costs and operating expenditures. In the last full year, annual net profits had increased by 16 percent in FY16, and a 17 percent net margin looked healthy for a consumer-facing firm.

But so far in FY17, the growth story seems to have taken a pause. First up, gross sales are not growing in double digits anymore. Breaking down the revenues, the liquor division – a star performer which historically accounted for roughly three-fourth of MUREB’s gross third-party sales – looks under stress.

Mu1

Having grown by an average of 17 percent p.a. between FY11 and FY16, gross revenues of alcoholic beverages marginally declined in 9MFY17. This reflects a tough operating environment, where liquor cannot be legally sold to Muslims in Pakistan, alcohol exports remain banned since 1977, and new levies hinder inter-provincial movement of the firm’s products.

Over at the Tops division, which has historically provided roughly 23 percent of the firm’s gross revenues from third-party sales, the growth momentum was preserved as gross revenues jumped 17 percent year-on-year. It must be noted, however, that the Tops division is a margin diluter for MUREB, as its operating margin is usually the lowest, and in low single-digits, among the three divisions.

The positive bit this year has been the surge in Glass division sales to third parties, which grew by more than 50 percent year-on-year in 9MFY17. Historically, MUREB’s glass division has provided a meager, 2 percent of the firm’s overall gross sales to third parties. However in 9MFY17, the glass division sales of bottles, jars and other glass products were 5 percent of the revenue mix. It must be noted that glass division usually posts the highest operating margin among the three divisions.

The slowdown in liquor division is not a good omen, as it is a main earner for the brewery. During the period under review, the bottom line sagged a great deal not just due to a slowing top line but also due to a more than five percentage point higher depletion of revenues on manufacturing cost of goods sold, which went on to exhaust 69 percent of net sales. To close the year on a note of profitable growth, MUREB must deliver a net sales figure of Rs2 billion or more in the final quarter.

Copyright Business Recorder, 2017

Comments

Comments are closed.