Murree Brewery Company Limited

Murree Brewery Company Limited (PSX: MUREB) was incorporated as a public limited company in 1861. The principal activity of the company is the manufacturing and sale of alcoholic beer, non-alcoholic beer, Pakistan-made foreign liquor (PMFL), aerated water, mineral water, juice, food products as well as glass bottles and jars. The company has three divisions – liquor, tops, and glass. The liquor division has over 75 percent share in the overall sales mix of MUREB.

Pattern of Shareholding

As of June 30, 2024, MUREB has a total of 27.664 million shares outstanding which are held by 1307 shareholders. Associated companies, undertakings, and related parties have the majority stake of 34.82 percent in the company followed by Directors, CEO, their spouse, and minor children holding 21.51 percent shares of the company. Foreign companies account for 18.81 percent shares of the company while the local general public and foreign general public hold 11.58 percent and 4.68 percent shares respectively. Insurance companies represent 4.23 percent of the company’s outstanding share volume. Banks, DFIs, and NBFIs have a 1.37 percent stake in the company while Modarabas and Mutual Funds hold 1.26 percent shares. The remaining shares are held by other categories of shareholders.

Historical Performance (2019-24)

With the exception of 2020, MUREB has been showing steady topline growth over the period under consideration. Conversely, its bottom line showed growth in 2021, 2022, and 2024. The gross margin of the company plunged until 2023. On the contrary, operating and net margins declined until 2020 followed by a rebound in 2021. For the next two years, operating and net margins slid. In 2024, all the margins picked up. The detailed performance review of the period under consideration is given below.

In 2019, MUREB’s net revenue posted a reasonable year-on-year growth of 11.73 percent to clock in at Rs.10121.28 million. PMFL [Pakistan-made foreign Liquor] continued to be the top contributor to MUREB’s sales mix, with around 39.5 percent share in 2019. This is followed by non-alcoholic beverages and products with approximately 26 percent share in the sales mix. Beer grabs the next spot with an 18 percent share. Tetra Pack Juices made a 9 percent contribution to the overall sales pie of MUREB in 2019. The remaining revenue comes from Juices NR, bottled water, glass products, and other finished goods. Except for glass products and miscellaneous finished products, all other categories touted growth in sales in 2019. In terms of geographical markets, 42 percent of MUREB’s sales come from Punjab, followed by Sindh which has a say of 39 percent in the sales revenue of the company. Balochistan and KPK have 9a percent and 7 percent share in the total sales of MUREB. The remaining 3 percent of sales came from the federal capital and other territories. Cost of sales magnified by 16.91 percent year-on-year in 2019 mainly on account of depreciation in Pak Rupee. Gross profit rose by 0.56 percent in 2019, however, the GP margin fell to 28.51 percent from the GP margin of 31.67 percent posted in 2018. Distribution expense grew by 42.38 percent year-on-year in 2019 due to a significant rise in advertising and publicity budget coupled with sales commission and service charges paid to a related party. Administrative expenses slumped by 5 percent in 2019 year-on-year mainly because the company booked reversals on slow-moving inventories in 2019 as against provision booked in the previous year. Other expenses also shrank by 3.73 percent year-on-year in 2019 due to a slump in provisioning against WWF. Other income grew by 19.11 percent year-on-year as the company booked massive gains on the re-measurement of investment property at fair value. Operating profit slid by 15.36 percent year-on-year in 2019. OP margin plunged to 13.85 percent in 2019 fromthe OP margin of 18.28 percent registered in 2018. MUREB had a debt-to-equity ratio of 17 percent in 2019 as against 15 percent in 2018. Hence, its finance cost stays under 0.5 percent of its topline in all the years under consideration. Moreover, the company makes finance income from its investments, which offsets the finance cost by a huge margin resulting in net finance income in all the years. Net finance income of MUREB posted a year-on-year growth of 51.75 percent in 2019 and stood at 3 percent of its topline as against 2 percent in 2018. Net profit slid by 5.66 percent year-on-year in 2019 to clock in at Rs.1222.94 million in 2019 with an NP margin of 12 percent versus an NP margin of 14.31 percent in 2019. EPS inched down to Rs.44.21 in 2019 as against EPS of Rs.46.86 recorded in 2018.

In 2020, MUREB’s topline plunged by 11.11 percent year-on-year. Except for an increase in the sales revenue of Tetra pack juices, bottled drinking water, and glass products, all other categories posted a decline in sales in 2020. It is to be noted that while the sales revenue from Punjab and Sindh as well as Islamabad posted a drop in 2020, the sales from Balochistan, KPK, and other territories inched up during the year. Cost of sales also declined by 7.47 percent year-on-year owing to curtailed production. Gross profit fell by 20.23 percent year-on-year in 2020 with GP margin nose-diving to 25.58 percent in 2020. Distribution expenses plummeted by 19.24 percent year-on-year in 2020 due to a considerable reduction in advertising and promotion expenses during the year combined with a lesser sales commission, freight charges, and service charges paid to a related party. Administrative expenses, on the back of increased salaries and wage,s grew by 27.86 percent year-on-year in 2020. Other expenses posted a considerable 133.96 percent year-on-year rise in 2020 due to the imposition of GIDC on all industrial and commercial entities which use gas for their business activities. Other income didn’t support either as it dwindled by 35.23 percent year-on-year in 2020. The result was a 49 percent year-on-year plunge in operating profit in 2020 with OP margin sliding down to 8 percent. Net finance income of MUREB grew by 22.55 percent year-on-year in 2020. The bottom line shrank by 44.25 percent in 2020 to clock in at Rs.681.73 million. NP margin dropped to 7.6 percent in 2020 while EPS dived to Rs.24.64.

In 2021, MUREB’s topline posted sales growth of 30 percent. During the year, MUREB also started exporting which greatly buttressed the topline. Except for juices NR, all other categories boasted impressive growth in 2021. Across the geographical markets, the sales from Sindh plunged in 2021, while other territories provided a positive contributions to the top line. High cost of sales culminated in a slight downtick in GP margin to 25.47 percent in 2021. In absolute terms, gross profit strengthened by 29.35 percent in 2021. Distribution expenses grew by only 4.49 percent year-on-year in 2021 as the company reduced its advertising budget and selling expenses including sales commission. Administrative expenses also declined by 7.41 percent year-on-year in 2021. Other expenses contracted by 12.40 percent year-on-year due to the high-base effect as the company booked provision for GIDC in 2020. Other income also buttressed the bottom line as it grew by 16.97 percent year-on-year in 2021 due to a gain on the re-measurement of investment property in 2021. Robust sales and contained expenses drove the operating profit up by 101.42 percent in 2021 with OP margin climbing up to 12.37 percent. Net finance income fell by 30.54 percent in 2021 primarily on the back of lower return on deposit accounts due to monetary easing during the year. Bottomline boasted a stunning 89.44 percent year-on-year rise in 2021 to clock in at Rs.1291.47 million with an NP margin of 11 percent. EPS also rebounded to Rs.46.68 in 2021.

MUREB’s topline grew by 30.55 percent in 2022 backed by both local and export sales. While export sales constituted only 0.2 percent of MUREB’s total sales in 2022, it registered an encouraging growth during the year. Across the categories, glass products underperformed while the remaining categories showed sales growth in 2022. Record high inflation, Pak Rupee depreciation as well as high energy and fuel charges pushed the cost of sales up by 34.25 percent year-on-year in 2022. This culminated in a drop in GP margin to 23.24 percent. In absolute terms, gross profit grew by 18.92 percent in 2022. Distribution and administrative expenses also surged by 28.16 percent and 19.27 percent respectively in 2022 on the back of rising inflation. Other expenses provided some respite due to a drop in provision for gas tariff differential in 2022. Other income also posted encouraging growth of 122 percent in 2022 due toa gain on re-measurement of investment property, a gain on disposal of operating fixed assets as well as rental income. Operating profit grew by 26.92 percent year-on-year in 2022 with OP margin slightly inching down to 12 percent. Net finance income posted an immense rebound of 61.35 percent year-on-year in 2022. While profit before taxation was up by 31.51 percent year-on-year in 2022, the imposition of a 10 percent super tax during the year almost nullified the net profit growth. MUREB’s net profit grew by only 0.2 percent in 2022 to clock in at Rs.1294.108 million with an NP margin of 8.5 percent. EPS clocked in at Rs.46.78 in 2022.

MUREB’s net sales grew by 22 percent year-on-year in 2023 due to an increase in sales volume as well as prices. Both local and export sales increased during the year. Across the product categories, revenue from Tetra pack juices and juices NR slid while all other categories outperformed last year. 29 percent higher cost of sales due to Pak Rupee depreciation, commodity super cycle in the global market, and high fuel and power charges shoved the gross profit down by 1 percent year-on-year in 2023. GP margin also nosedived to its lowest level of 18.85 percent in 2023. Distribution expenses slid by 1.27 percent during the year due to lower selling expenses incurred during the year. Conversely, administrative expenses mounted by 10.61 percent in 2023 due to higher payroll expenses on account of inflationary pressure. This was despite the fact that the company squeezed its workforce from 1855 employees in 2022 to 1796 employees in 2023. Other expenses gave some breather as it descended by 9.31 percent year-on-year in 2023. This was because the company didn’t book any provision on gas tariff differential in 2023. Other income went down by 35.84 percent in 2023 as the company recognized a lesser gain on the sale of operating fixed assets and a lesser gain on the re-measurement of investment at fair value. Operating profit plummeted by 7 percent in 2023 with OP margin falling down to 9.17 percent. Despite the support provided by net finance income which magnified by 16.97 percent year-on-year in 2023, bottom line slumped by 1.58 percent year-on-year to clock in at Rs.1273.69 million in 2023 with the lowest NP margin of 6.85 percent. EPS clocked in at Rs.46.04 in 2023.

In 2024, MUREB’s topline registered 28 percent year-on-year growth. Both local and export sales grew during the year. Across the categories, except for a downtick in tetra pack juices, juices NR, and glass products, the revenue from all other categories significantly increased during the year. High raw materials prices coupled with elevated energy tariffs resulted in a 20.71 percent spike in the cost of sales in 2024. However, with increased volumes and prices, the company passed on the onus of cost hikes to its consumers which resulted in a 59.43 percent escalation in gross profit in 2024. GP margin which had been declining until last year, jumped up to 23.48 percent in 2024. Distribution expenses mounted by 13.62 percent during the year on the back of payroll expenses, freight charges, advertising expenses as well as sales commission incurred during the year. Administrative expenses multiplied by 10.93 percent in 2024 due to inflationary pressure despite the fact that the company further cut down its workforce from 1796 employees in 2023 to 1710 employees in 2024. Other expenses surged by 85 percent in 2024 due to higher provisioning done for WWF and WPPF. Other income ticked down by 7.84 percent in 2024 as the company recognized lesser gain on the re-measurement of investment property at fair value. Operating profit posted a staggering growth of 101.31 percent in 2024 with OP margin climbing up to 14.42 percent. Net finance income strengthened by 71.78 percent in 2024 due to higher returns on deposit accounts as well as dividend income. Net profit picked up by 105.81 percent to clock in at Rs.2621.355 million in 2024 with EPS of Rs.94.76 and NP margin of 11 percent.

Recent Performance [1QFY25]

During the first quarter of FY25, MUREB registered year-on-year topline growth of 21.25 percent. This was on account of increased volumes and upward price revision. Upward price revision resulted in a 35.18 percent improvement in gross profit in 1QFY25 with the GP margin clocking in at 27 percent versus the GP margin of 24.22 percent recorded during the same period last year. Distribution and administrative expenses spiked by 24.35 percent and 25.24 percent respectively due to higher freight charges, sales commission, and payroll expenses. Besides an increase in sales volumes, inflationary pressure also played a pivotal role in pushing up the operating expenses. Other expenses mounted by 53.65 percent during the period under consideration due to higher profit-related provisioning. Other income also picked up by 20.72 percent in 1QFY25 may be because of higher gain recorded on re-measurement of investment property at fair value. MUREB recorded 39.45 percent taller operating profit in 1QFY25 with OP margin clocking in at 16.86 percent versus OP margin of 14.66 percent recorded in 1QFY24. Net finance income strengthened by 174.65 percent during 1QFY25 due to higher dividend income and return on saving deposits recognized during the period. Net profit picked up by 54.17 percent to clock in at Rs.913.861 million in 1QFY25 with EPS of Rs.33.03 versus EPS of Rs.21.35 recorded during 1QFY24. NP margin grew from 10 percent in 1QFY24 to 12.86 percent in 1QFY25.

Future Outlook

The company plans to enhance its capacity and upgrade its production lines to enhance its operational efficiency and take advantage of the improvement in macroeconomic fundamentals.