- Som Distilleries' Q1 revenue fell 16.8% and net profit dropped 74.5% year-on-year
- Unseasonal rains and Karnataka tax changes disrupted beer demand and sales volumes
- Pricing pressure from discounts led to a 1-2% margin decline, but profits stayed resilient
Som Distilleries & Breweries Ltd's recent earnings weakness was driven largely by external factors rather than structural demand issues, Managing Director JK Arora said, expressing confidence that the company will recover lost ground in the current quarter.
The brewer reported a sharp decline in profitability for the quarter, with revenue falling 16.8% year-on-year to Rs 251 crore, while net profit plunged 74.5% to Rs 5.5 crore. EBITDA margins also contracted significantly to 7.8% from 12.1% a year earlier.
According to Arora, unseasonal weather played a major role in disrupting beer demand across India. “Normally, summer continues till July, but this year rains began from mid-June. That affected beer consumption across the country,” he said.
Adding to the pressure was a sudden change in Karnataka's tax structure, which disrupted sales in one of India's key beer markets. While the taxation issue has since been corrected, Arora noted that demand recovery takes time after such disruptions.
Pricing Pressure Hit Profitability
Weak demand also led to pricing pressure, as brewers resorted to discounts to protect volumes. This resulted in a modest impact on profitability, with margins declining by around 1–2%, Arora said.
However, he emphasised that the company's overall profitability remained relatively resilient compared to peers. “Margins for the first six months were actually better than last year. The main impact was due to lower sales volumes rather than a structural margin deterioration,” he said.
Encouragingly, the current quarter has started on a stronger note, with improved sales momentum. Arora expressed confidence that the company would recover most of the lost revenue by the end of the financial year.
Supply Disruptions Ease
On the cost front, the company faced supply constraints in beer cans due to import restrictions and rising demand. However, the situation has improved after the government permitted imports from neighbouring countries such as Thailand and Sri Lanka.
With additional domestic manufacturing capacity expected to come online, Arora said the packaging supply issue should ease further in the next financial year.
License Issue Under Legal Review
The company is also awaiting a court order regarding the suspension of its manufacturing license in Madhya Pradesh. Arora said the matter relates to interpretation of regulations and expressed confidence in a favourable outcome.
He added that while the disruption has had some impact, it is unlikely to materially affect the company's overall financial performance.
Despite recent earnings weakness, Som Distilleries' management remains optimistic about business recovery, supported by improving demand and easing supply constraints.
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