The Hindu Business Line : SABMiller sees profit decline in Indian operations

Bangalore, Aug. 21 SABMiller, which makes Foster’s beer, has seen a decline in profits from its Indian operations during 2007-08 but is setting up a one million hectolitre capacity brownfield brewery in Haryana this year.

The beer maker says that it may also incur a loss of around Rs 41 crore during the current fiscal as the cost of malt and fuel have gone up nearly 100 per cent and because of higher depreciation and interest costs. However, SABMiller is expected to return to profits posting about Rs 20 crore during 2009-10, according to a report released by the company.

A SABMiller spokesperson was not available for comment. The report also said SABMiller has restructured its organisation in India to make it more responsive to the current market conditions.

SABMiller and its competitor United Breweries collectively have over 90 per cent of the share of the beer market in India. For 2007-08, SABMiller’s net profit declined 14 per cent to Rs 34.4 crore while net turnover grew 25 per cent to Rs 1087 crore. United Breweries managed to nearly maintain its net profit to around Rs 55 crore while total income grew nearly 39 per cent to Rs 1591 crore during the same period, according to the Bombay Stock Exchange Web site.

The report said SABMiller’s market share was about 35 per cent, nearly same as last year’s but it invested about Rs 281 crore in upgrading existing plant and machinery and developing capacity. It has also set up new can lines in its Mysore Breweries as well as Rochees breweries.

SABMiller’s operations were, however, affected at its Charminar Breweries in Hyderabad which is its largest brewery in India. The company said as it was unable to receive price increase from the Andhra Pradesh Beverages Corporation to partly offset the increase in the cost of raw materials and other inputs; it was forced suspend operations at the brewery for over a month during the peak season last year. The retail price of beer is usually fixed by the respective State governments in the country.

SABMiller India Managing Director, Mr Jean Marc Delpon de Vaux, had earlier told Business Line that the company will invest $100 million every year for the next five years and set up four greenfield breweries to consolidate its operations in the country. SABMiller plans to add about 9 million cases every year. The beer company has invested about $650 million in its Indian operations during the last five years.

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