Volumetric decline at Murree

Shareholders of Murree Brewery stock are more than just lucky investors. The stock that was trading at Rs250 per share in mid-2013 at the local bourse has now crossed the Rs1,000 thresholds in 2015 and continues to climb. The UK-based THS Kingsway Funds is responsible for part of this performance, but the other part is the double-digit sale growth of the company.

One of the subcontinents oldest public listed companies, Murree Brewery (MUREB) has seen double-digit growth in sales for the past few years, and this pattern continued in FY15.The firms net turnover grew by nearly 17 percent to reach close to Rs6 billion in FY15.

For the first nine months of FY15, the company has seen higher volumetric sale but the sale volume has declined in the fourth quarter of FY15. The 81 percent of the sale belongs to the liquor division that has always been a top performing segment of the firm. In order to explain volumetric decline, the CEO of Murree Brewery, Bhandara states that the Punjab government has started charging double duty on the export of alcohol from the province.

This action has cost not only the top line of the company, but it also cost the national exchequer Rs2,000,000 in excise duty and other taxes from the industry, contends Bhandara. He also informs that the Punjab government has taken these actions at the expense of other provinces; Sind, Baluchistan and the Capital territory. MUREB has taken advantage of the global decline in commodity prices and fuel prices. That is why the core cost has stayed flat during the financial year, even though the company saw sales expansion. The cost of sales increased by nearly 16 percent; however as a percentage of net sales it stayed flat. Similarly, the gross margin of the company, has improved by 100 bps, year-on-year.

In FY15, many FMCG companies have seen their expenses go up quite a bit. But MUREB has kept a grip on its distribution and administrative expenses. These expenditures increased by just one percent and four percent, respectively in terms of net turnover.

However, unlike other consumer goods companies; Murree Brewery was unable to translate the strength of the top line, to its bottom line. The bottom line improved by only three percent to Rs996 million, which corresponds to earnings per share of Rs43.21.