Oct 17, 2017

I was checking Som Distilleries result

SOM Distilleries result for Sept Quarter has come today. I have mentioned it recently on facebook post.
Earlier I also mentioned GM Breweries and 1 more. But I have took trading bet on SOM distilleries few days back.

I wanted to see more profit based on revenue growth. Expense is more than expected. Still Alcohol companies pay State excise duties after GST!

Here is some output from my quick analysis:

Expense of material consumed is little more. It is more by 2% YoY.

Earlier it was 28%. Now, 30%.

State excise duties paid was 16% earlier and now 21%. Big negative.

Other expenses is high by 50%. This is big too. 

Still EPS is 1.8 now than 1 earlier. YoY.

Price action is not supportive after result. Should catch later on positive side.

Here are the reasons for input cost rise. If you too forgotten the effect of GST on Alcohol then you need to read this article.
Alcohol for human use has been kept out of GST but raw materials and packaging products are included in the new tax. That means liquor firms will incur higher costs but won’t be eligible for output credit. Since they are not eligible for credit, they won’t be able to offset the cost increase like other sectors.
“Raw materials such as molasses used to produce ENA (extra neutral alcohol) has been posted at 28%, i.e. an increase of 12.5% compared to the pre-GST tax structure, while a majority of dry packaging goods have been slotted at 18%, i.e. an increase of 3.5% to 5.5%,” said Sridhar Pongur, joint managing director of John Distilleries Pvt. Ltd, that makes single-malt whiskies under the Paul John brand.

The catch is liquor firms have to approach state governments, which handle the distribution of alcoholic beverages in nearly 65% of the country, with requests to increase prices and wait for approval.

If state governments increase prices for liquor firms by between Rs50 and Rs70 per case, that should help offset the rise in costs, said single-malt maker Amrut Distilleries Pvt. Ltd’s executive director Rakshit Jagdale.

Jagatjit Industries Ltd expects the introduction of GST to push costs up 7-9%.