Bengaluru: India’s largest alcoholic beverage (alcobev) company United Spirits Ltd’s second quarter profit soared nearly 69% on double-digit growth in sales of its premium brands.
But in the notes of its results filing with the BSE on Wednesday evening, the company said its profit for the financial year ending 31 March 2019 -- linked to remuneration and calculated under Section-198 of the Companies Act -- is expected to be negative due to certain amendments made under the Companies (Amendment) Act 2017. These amendments, which have been made to Section-198 and schedule-V of the Companies Act 2013, are effective from 12 September and relate to the remuneration payable to directors by a company.
United Spirits has negative free reserves and accumulated losses of about ₹ 2,658 crore as of 31 March 2018. The amendments require a company to offset accumulated losses against the profits in a given financial year while calculating the profit of the company for said financial year under Section-198, United Spirits said.
As a result of these amendments, the alcobev firm’s remuneration paid and payable to executive directors, and that payable to non-executive directors, is likely to exceed the amended limits. The company proposes to seek shareholder approval shortly for the remuneration paid and payable to such executives for the 2018-19 financial year.
Diageo Plc-owned USL’s July-September quarter net profit increased to ₹ 258.7 crore from ₹ 153.1 crore on an annual basis. Total revenue grew 14.53% on a standalone basis to ₹ 7,153.1 crore from the same quarter a year ago.
Analysts polled by Bloomberg had expected the company’s quarterly net profit to come in at ₹ 177.6 crore on revenue of ₹ 2,155.9 crore on a standalone basis.
“In the second quarter, the prestige and above segment net sales grew 19%, despite growing by double digits in the same quarter last year. With a third consecutive quarter of double digit sales growth, the segment now represents 66% of net sales. Within the segment, our scotch brands showed strong growth and our renovated prestige brands, such as Royal Challenge and Signature (whiskies), also grew faster than the overall segment," the company’s managing director and chief executive officer Anand Kripalu said in a statement.
USL’s overall volume sales grew 6% in the first half of 2018-19 versus the same period on a year-ago basis.
Volumes in the prestige and above segment, which includes brands like Royal Challenge and Signature, grew 14.28% in the first six months of the financial year and 15.38% in the July-September quarter on a year-on-year basis. Volumes in the popular segment – brands like Bagpiper and Director’s Special–declined 2.1% in the first half of the year but grew 5.3% in the second quarter.
“Investing behind our brands continues to be an area of focus for us, with reinvestment rate increasing to 9.7% in the first half, versus 8.2% in the same period last year," Kripalu said, adding that marketing investment increased by 34%.