Conference Call with United Spirits Management and Analysts on Q2FY22 Performance and Outlook. Listen to the full earnings transcript. Management in attendance: Hina Nagarajan and senior management team
Performance highlights: Reported net sales increased 14%, reflecting a strong quarter. Off-trade gained momentum after the second wave of the Covid-19 pandemic; On-trade continues to gradually recover with the easing of restrictions. Prestige & Above segment net sales grew 20.8%. Delivered high double digit Scotch whisky growth during the quarter. Popular segment net sales remain flat compared to the same quarter of the previous year. Gross margin was 44.2%, up 207bps on reported basis and 190bps on under-lying basis. Rising inflationary pressure on COGS and a one-off tax provision was offset by improved mix management, continued focus on productivity and lapping the benefit of a one-off inventory provision in the prior year. Reported EBITDA (Rs. 426 Crores) increased 57.9% and margins increased by 483 bps due to gross margin enhancement, lapping a one-off expense in the prior year and a net one-off tax reversal in the current quarter. Excluding the one-offs, underlying EBITDA was up 194 bps from 14.5% to 16.4%. Advertising & Sales Promotion was 7.3% of sales and the investment behind brand building was back to normal levels after a Covid impacted muted Q1. Interest includes one-off reversal benefit of non-debt interest related charge. Underlying interest expense was Rs 21 Crores, down 59% vs prior year, driven primarily by debt and interest rate reduction. Profit after tax was Rs. 274 Crores, up 113% and PAT margin was 11.2%. First half performance highlights: Reported net sales increased 27.9% lapping weak prior year comparators. Prestige & Above segment net sales increased 32.4%. The growth was driven by resilient consumer demand and positive mix. Popular segment net sales increased 20.4% within which the priority states increased 17%. Gross margin was 44.4%, up 239bps primarily due to improved sales mix, productivity benefits from everyday cost efficiencies and a benefit from lapping a one-off inventory provision. A&P; re-investment rate was 6.4% of sales. There has been gradual upweight in brand spending in second quarter to support growth opportunities with easing of trade restrictions and arrival of the peak season. Reported EBITDA was Rs. 593 Crores, up 209%. Reported EBITDA margin was 14.6%, up 856 bps primarily due to gross margin enhancement, operating leverage and lapping one-offs in prior year. Excluding the one-off, underlying EBITDA was up 668 bps. Reported interest cost was Rs.18 Crores, down 82% driven by debt and interest rate reduction and one-off reversal. Exceptional item includes a one-off provision towards an additional demand in relation to a historical customer dispute. Tax includes a one-off reversal of 19.2 Crores. Profit after tax was Rs. 342 Crores and PAT margin was 8.4%. Ms Hina Nagarajan, CEO, commenting on the quarter ended 30 September 2021 said: “We have delivered a strong quarter and the performance underpins improved momentum across the business. The business has emerged stronger from the pandemic and our people have responded with pace, agility, and creativity to seize the opportunities in the marketplace. The quarter witnessed the roll out of the renovated consumer bundles of Black Dog and Signature Whisky in select states to an encouraging response. We also launched Royal Challenge American Pride, a unique offering in the country with Bourbon, Scotch and select Indian malts & grain spirits. We are focused on sustaining the growth momentum while working on Revenue Management and productivity initiatives across the value chain to counter the rising inflation trend being experienced while exiting the quarter. Our portfolio, with recent innovations and renovations, is well-positioned to capitalize on the rapidly growing premiumization in the category and we remain committed to profitable growth and long-term value to all our stakeholders.” Result PDF