United Spirits Q2 net profit down 43% YoY at Rs 128 crore

United Spirits Ltd (USL), the country’s largest liquor company controlled by UK-based multinational spirits and beer maker Diageo Plc, said on Wednesday net profit fell 42.8% to Rs 128.4 crore in the second quarter of the ongoing fiscal year, from Rs 225 crore in the year-ago period.

The owner of McDowell's No.1 and Royal Challenge whiskey brands also posted a 6.5% decline in net sales to Rs 2,145.9 crore for the quarter ended September 30, compared to net sales of Rs 2,296.2 crore in the corresponding period last year, ET’s calculations showed separately.

Revenue from operations rose marginally (2.4%) to Rs 7,459.3 crore, from Rs 7,281.9 crore in the previous year reporting period, it said in a stock exchange filing.

The company said the revenue recovery rate improved from the sequential first quarter, despite on-trade remaining largely shut due to lockdowns and contraction of owned and franchise businesses in Andhra Pradesh.

Net sales in its Prestige and Above segment – which has mid-segment and premium brands such as McDowell’s No 1, Royal Challenge, Johnnie Walker and Vat 69 – grew 1%, backed by strong momentum in its Scotch portfolio and driven by improved relative price positioning in key markets, the company said.

In the first quarter, net sales in the segment had declined 52% on closure of physical stores due to the lockdown and drying up of social occasions for consumption of liquor, it said.

Net sales in the Popular segment – which has mass-market brands such as Haywards, Bagpiper and White Mischief -- fell 12.5% overall due to increased consumer prices and an unfavourable state mix which impacted demand in the price-conscious segment, USL said.

The company reported earnings before interest taxation depreciation and amortisation (Ebitda) margin of 12.6% in July-September, down from 18.1% last year, due to higher investment on advertising and promotions in support of the national renovation rollout of its two core brands -- McDowell’s No.1 Whisky and Royal Challenge Whisky – as well as lower fixed cost absorption.

“The underlying revenue (sales volume) decline of 3.4% in the second quarter is ahead of expectations and reflects the resilience of our category, notwithstanding prolonged on-trade closures, the route to market change in Andhra Pradesh and high taxation-led price increases post-Covid-19. The agility of our supply chain team provided a fast start post-lockdown and the renovation of our two core brands supported the top-line recovery,” said Anand Kripalu, CEO of Diageo India, in the filing.

USL said it remains cautiously optimistic about the gradual re-opening of on-premise channels (restaurants and bars) and the ongoing festive season, but is unable to provide quantitative guidance for fiscal year 2021 due to unprecedented variability in the macro environment brought on by the outbreak.