Broo has returned its first quarterly profit since listing on the ASX in 2016.

After acapital raiseand adeal with Carlton & United Breweries to brew its beer as it attempts to turn its fortunes around, beleaguered Broo made $44,000 in the quarter after costs for its operating activities.

The result carries a number of asterisks however, given that they come after selling beer paid for in previous quarters, and even with the small quarterly profit, Broo is still recording extensive losses of just under $3.0 million for the year to date.

Quarterly profit

For the three months to June 2021, Broo reportedly earned $1.0 million from customer receipts, its highest level since the first quarter in 2019. The company said it had $116,000 in cash at the end of the quarter.

However it appears that Broo’s marginal profits have been derived from running out stock paid for a year ago in a quarter where it appears not to have completed major expenditure on its contract brewed beer.

Last quarter the company reported it had spent $1.1 million in product manufacturing costs, on top of $904,000 spent in the September quarter last year during when it placed its first order with CUB.

There has also been some confusion relating to manufacturing costs, with its investor presentation last Friday advising the company had spent $729,000 on its contract brewed beer in the quarter, but its actual accounts showed only $124,000 spent on manufacturing in the quarter.

Brews News has received reports that retailers are buying significant volumes of Broo at close to its expiry date, suggesting it was produced as part of its first order last August. Landed unit costs of $22.80, including GST, have been reported by retailers. Cases have appeared in bottleshops for as low as $28.99, calling into question the long-term profitability of the sales strategy.

For the year to date, Broo is still recording extensive losses of $2.9 million.

Broo’s contract brewing deal with CUB conceivably gives the floundering brewer scale, which it has supplemented with a reinvestment in sales and marketing activities following an agreement with ALM which was extended nationwide earlier this year,

However it is unclear how much of its stock from the CUB deal has been sold, with an investor presentation advising case sales had risen 400 per cent in the quarter compared to the same period last year. An earlier announcement in May indicated that it sold under 1,000 cases in February, which had risen to above 7,000 by April.

Stockists are reportedly up by 250 per cent, and Broo is aiming to have 3,000 stockists in the next 12 months for its Broo Premium Lager and Broo Hopper Lager, a mid-strength coming in at 3.5% abv. Stockists may have increased as retailers take advantage of Broo’s heavy discounting and it remains to be seen whether these retailers will stock the beer at full price.

Ballarat sale

In June, Broo announced that it intended to sell its Ballarat property for $7.5 million, on which the ‘world’s greenest brewery’ was set to be built. The sale is conditional on approval from Development Victoria. The City of Ballarat has said it will write to Development Victoria to advocate for the site in the Ballarat West Employment Zone to be returned and put back on the market.

Broo had purchased the land in 2017 for $2.16 million.

In the same month, Broo was on the receiving end of a winding up order at its Mildura Brewery after a creditor applied to the Supreme Court of Victoria for outstanding debts totalling $45,439.52 in April. This was narrowly avoided after the creditor asked the court to dismiss the application.

Broo currently has a market capitalisation of $15.1 million, down from the $126 million it valued itself at when it first listed in 2016 at $0.20 per share.

As of the time of writing, Broo shares were valued at $0.016, rising from $0.013 prior to Friday’s announcement.