United Spirits swings to profit in Q4, revenue grows 7.96%
United Spirits reported a stand-alone quarterly profit of Rs211 crore compared with a loss of Rs104.2 crore during the same period a year ago
Bengaluru: India’s largest liquor firm United Spirits Ltd (USL) swung to a quarterly profit in the fourth quarter of 2017-18 on double-digit volume growth in its prestige-and-above business division.
The Diageo Plc-run company reported a stand-alone quarterly profit of Rs211 crore compared with a loss of Rs104.2 crore during the same period a year ago, it said in a filing with the BSE on Thursday evening. Revenue grew 7.96% to Rs7,021.4 crore on an annual basis.
Volumes in USL’s prestige-and-above segment grew 15% during the January-March quarter. The company’s prestige-and-above division consists of premium brands like McDowell’s No.1, Royal Challenge and Signature whiskies. This division accounted for 63% of the company’s net sales during 2017-18.
“Our performance has substantially improved in the fourth quarter as several regulatory challenges are now behind us. The prestige-and-above segment underlying net sales grew 4% supported by the continued success of our brand renovations including McDowell’s No.1 whiskey, Royal Challenge and Signature,” United Spirit’s chief executive officer Anand Kripalu said in a statement.
During the quarter, gross margin was at 48.8%, up 461bps, as the one-off impact of operating model changes as well as price increases and productivity gains more than offset the adverse impact of the implementation of the goods and service tax (GST).
The operating model change refers to its decision to take the franchise route for some of its popular segment brands, i.e. value brands, in a few states.
Overall profit after tax for the year increased 231% according to the company, helped by its focus on reducing interest costs and monetizing non-core assets, coupled with lower exceptional items.
“Overall, in this fiscal, we have overcome some of the biggest challenges the spirits industry has ever faced including the highway ban and the introduction of GST. We have continued to execute against our strategic priorities and I am pleased that despite this challenging environment, we have managed to deliver top line growth as well as margin expansion while also increasing investment behind our brands,” Kripalu added.
Still, the popular division continues to post more subdued numbers, although that is in line with a broad industry-wide trend of slower growth in value brands compared with premium labels. Volumes in its popular segment – that includes brands like Bagpiper and Director’s Special - declined 13% in the fourth quarter from a year ago.
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