BackUnited Spirits Q4 loss at Rs104 crore
United Spirits' revenue during the March quarter grew 9.22% to Rs6,485.2 crore
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Bengaluru: India’s largest liquor company United Spirits Ltd on Tuesday reported a March quarter net loss of Rs104.2 crore, compared with a Rs1.4 crore net profit a year ago, largely because of the impact of exceptional items.
Excluding these items (mainly a provision of Rs264.5 crore to settle a pricing issue with a customer), the Diageo group company earned a profit of Rs152.3 crore. Revenue during the quarter grew 9.22% to Rs6,485.2 crore.
In January, the company had said it would start franchising some brands from its popular segment in states such as Kerala, Andhra Pradesh and Goa to focus on its more profitable “prestige and above" business. On Tuesday, United Spirits said it has entered into additional agreements in several more states—including Delhi, Rajasthan, Chandigarh, Madhya Pradesh, and Uttar Pradesh—to franchise brands from its popular segment.
“These changes will allow us to further improve our operating model and focus our business on the biggest profitable growth opportunities," chief executive Anand Kripalu said in a statement.
United Spirits’s popular segment includes brands like Bagpiper, Director’s Special and Haywards whiskies while key names in its prestige and above business include Signature, Royal Challenge and Antiquity Blue whiskies.
Sales in the prestige and above segment, which accounts for 41% of volumes and 58% of revenue, grew 10% in the March quarter fuelled by the focus on premiumization and brand renovation.
United Spirits has been betting on relaunches of its top whisky brands, including redesigns of its McDowell’s No.1, Royal Challenge and Signature whiskies, to drive growth in a market that has been sluggish for more than five years.
ALSO READ: United Spirits hopes relaunch of whisky brands will help regain market share
Its popular segment still makes up 59% of total volumes and 42% of net sales. Revenue in this part of the business declined 16% in the March quarter, hit by a total ban on sale of liquor in Bihar and changes in United Spirits’ operating model for the segment. Policy changes, including the Supreme Court’s ban on the sale of all liquor near state and national highways and the goods and service tax (GST) that is expected to come into effect from 1 July, will hurt, the company said.
“Our initial assessment on GST suggests that while alcohol for human consumption has been excluded from GST, the additional tax on input materials and services will result in stranded taxes and impact margins," Kripalu said. United Spirits’ gross margin during the period was up 338 basis points at 44.1%. One basis point is one-hundredth of a percentage point.
The company will work with the central government to minimize the hit and approach state governments for price increases, Kripalu said, adding the highway ban will continue to hurt performance in the short term. United Spirits will achieve its medium-term target of double-digit growth in revenue and improve margins to mid-high teens, he added in the statement.
United Spirits shares closed 3.63% higher at Rs2,089.85 on the BSE on Tuesday, while the benchmark Sensex rose 0.16% to 31,159.40 points.
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