Losses continue for Broo despite growth

ASX-listed brewer Broo’s run of losses has continued, though the company has posted a smaller loss for the last quarter.

Despite boasting an increase in domestic wholesale sales of 86 per cent and an increase in retail revenues of 20 per cent over the previous quarter, the company still recorded cash outflows of $137,000.

In its third quarter update, the company said it was pleased with its strong growth.

“The Company is pleased to release another quarter of strong growth, continuing the trend set by previous quarters that have driven increased domestic sales and distribution, expected to continue in the current quarter,” the statement said.

“The Board and Management review of corporate and operational costs have led to significant reductions across all entities.

“With further reductions to follow in conjunction with release of new product lines and continued sales growth the Company is confident of becoming profitable next financial year prior to the first instalment of Chinese distribution fees.”

In 2017 Broo announced a Chinese distribution agreement with Beijing Jihua Information Consultant. The ‘Take or Pay’ agreement was based on 1.5 billion litres of Broo Premium Lager over a seven-year period with Jihua paying a fixed rate per litre.

Broo values the distribution arrangement at approximately AUD $120 million over the seven years.

Broo’s third quarter update says that it will receive a payment under this agreement of $19.6 million in December 2020.

Last October Broo released a market update providing its first distribution volumes of 19.2 million litres in its first year.

As with past reports, the company says that it expects that it will continue to have negative operating cash flows in the short term.

“Negative net operating cash flows are expected to significantly decrease in the current and future quarters.”

The company reported cash holdings of $169,000 down from $638,834 at the end of the last financial year.

Broo’s shares are currently trading at $0.023.

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