United Breweries down after MD resigns but SC stay on penalty order arrests downfall

United Breweries | CMP: Rs 1,480.65 | The stock was down over 4 percent after the firm posted loss of Rs 2.1 crore for December FY23 quarter, against profit of Rs 90.56 crore in same period last year, impacted by weak operating performance and exceptional loss of Rs 33.12 crore. Revenue for the quarter at Rs 1,611 crore grew by 1.9% over a year-ago period. On the operating front, EBITDA fell 54% YoY to Rs 76.65 crore and margin plunged 623 bps to 4.75% in the same period. Numbers missed analysts' expectations.

Shares of United Breweries fell more than 1 percent on February 20 after the company’s top managing personnel resigned. However, the Supreme Court stay on the penalty order of NCLAT and CCI limited the downfall in the stock.

At 10:44 am, shares of the company were trading 1.2 percent lower at Rs 1,458.15 on the BSE.

United Breweries, part of Heineken, announced that the company's Managing Director and Chief Executive Officer, Rishi Pardal has tendered his resignation on February 16, 2023, and his six months notice period has begun.

Jacco van der Linden, President – Asia Pacific, Heineken, and a member of the United Breweries Board said, “With Rishi’s leadership, UBL (United Breweries) has successfully navigated through Covid-19 challenges and has made significant steps in integrating UBL into the Heineken Group while keeping a focus on the business.”

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During Rishi’s tenure, the company has deepened the Heineken bench of talented executives with a good mix of externally recruited and Heineken talented and experienced leaders, added Jacco van der Linden.

Besides this, the Supreme Court on February 17 reportedly stayed the order of the National Company Law Appellate Tribunal (NCLAT), which upheld the penalty of Rs 751.83 crore and recovery proceeding imposed on United Breweries by the Competition Commission of India (CCI).

In September 2021, the CCI found United Breweries, SABMiller India, Carlsberg India and All India Brewers’ Association guilty of cartelisation in the beer market and imposed a total penalty of Rs 862 crore. United Breweries was directed to pay Rs 751.83 crore.

The company saw its beer volume grow by 4 percent year-on-year (YoY) in 3Q FY23 lower than Nirmal Bang Istitutional Equities’s estimate of 10.5 percent. The YTD growth stood at 3 percent compared to 2019. The premium segment rose by 13 percent YoY in 3Q FY23 ahead of market growth with a strong performance by Heineken and Kingfisher Ultra & Max.

The company said in its earnings conference call that Kingfisher Ultra is doing well and grew around 20 percent in 3Q FY23 while Kingfisher Max also witnessed strong double-digit growth.

Nirmal Bang remains optimistic about the medium-term volume growth opportunity that the Indian beer industry offers especially for United Breweries considering it is a market leader in the space.