Co facing cost pressures

Our Bureau

Mumbai, Oct. 26

Kingfisher has dominated the growth in United Breweries Ltd (UB) and strong beer has been the key driver of the company's performance, Dr Vijay Mallya, Chairman of the company told analysts on Thursday.

The company is also looking to beef up its manufacturing capacities with increased spending in existing and proposed facilities, Dr Mallya said. This comes even as competition was coming into the UB group's back-yard, in the form of multinational companies seeking acquisition opportunities in India.

The company was facing cost pressures from higher input costs and the opening of the North-Indian market that had to be serviced from breweries in distant markets, he said. The resulting high freight costs and higher brand spends were some of the other cost pressures, he said. UB officials said that the company was looking at investing Rs 350-400 crore over the next three to four years in upgrading existing manufacturing capacities and adding greenfield facilities. The tendency is towards owned-capacities, he said, given the tax-structure and the consolidation in the local market.

Dr Mallya did not let in on the company's alleged overseas overtures towards Whyte & Mackay. "I have not denied my interest in Whyte & Mackay," he said and added that there was a strong rationale in being interested in that business. He indicated that work was in progress, without divulging details.

Profit jumps

UB clocked a 225 per cent growth in profit after tax for the quarter ended September 30 at Rs 13.20 crore, as compared to Rs 4.06 crore in the corresponding quarter previous year. The company clocked sales of Rs 343.78 crore(Rs 158.68 crore) in the corresponding period previous year.

UB clocked a first half net profit of 40.73 crore for the six months ended September 30, up 127 per cent from the previous year's first half net profit of Rs 17.90 crore. The company clocked sales of Rs 619.94 crore(Rs 377.36 crore).

(This article was published in the Business Line print edition dated October 27, 2006)
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