Murree: in good spirits

Despite the pandemic, the prominent maker of soft drinks, alcoholic beverages, mineral water and food products has been able to do much better than it did last year, as per its financials sent to the bourse for the year ended June 30, 2021. Murree Brewery Company Limited (PSX: MUREB) has recorded a 30 percent increase in its FY21 topline, which, along with cost efficiencies, yielded a more-than-proportional 89 percent jump in bottomline.

The roughly Rs12 billion in FY21 net turnover helps MUREB to recover from the dip in sales during the latter months of FY20 associated with early stages of Covid-19. And now the FY21 topline figure is an all-time high for the company. MUREB is organized into three divisions: roughly three-quarters of third-party sales are usually generated by the Liquor Division, about a quarter by Tops Division, whereas majority of Glass Division revenues are inter-company sales to those two divisions.

The liquor business, which is also a major provider of company’s profits, was affected towards the end of FY20, as closure of hotels during Covid-19 lockdowns affected the hospitality industry. However, FY21 provided better results as the hotel industry bounced back; besides, consumer demand for soft drinks and food products remained strong. Among the top-selling MUREB products are Pakistan-made foreign liquors, non-alcoholic beverages and products, beer, juices, and bottled drinking water. About three quarters of sales usually take place in the markets of Punjab and Sindh.

During FY21, the company’s cost of sales grew in tandem with net turnover growth, thereby eating up same 74.5 percent slice of the topline as in FY20. However, this ratio is on the high side, as it used to average between 64 and 69 percent in recent years. Financials received a clear boost from controlled growth in selling expenses as well as visible decline in administrative expenses and ‘other expenses’. As a result, MUREB exhausted roughly 14 percent of its net turnover on these three expenses heads, which is lower by 4.5 percentage points compared to FY20. That shows in the operating margin, which jumped from 8 percent in FY20 to 12.4 percent in FY21, even as operating profits doubled in value to Rs1.4 billion.

Down the line, the impact of those favorable movements was somewhat diluted by the 28 percent drop in ‘finance income’ (which income derived from financial assets such as bonds and deposit accounts as well as dividend income). This resulted in pre-tax profit growth coming in at 61 percent year-on-year – lower than operating profit growth, but significant nonetheless. The pre-tax profits at Rs1.7 billion in FY21, however, were still shy of the Rs1.8 billion peak seen in FY18.

In the end, the after-tax-profit for the year jumped by 89 percent, due to above-mentioned factors. The firm booked lower income tax expense in relative terms (23% of pre-tax profits in FY21, compared to 34% of pre-tax profits in FY20). The net margin reached 11.1 percent, a notable improvement from 7.6 percent seen in FY20. With economy improving, let’s see what FY22 has in store for Murree!