United Spirits has disappointed in the June quarter and has blamed poor showing in Tamil Nadu and higher raw material prices as culprits. It has also reconstituted its Board of Directors in light of recent shareholding developments
Diageo controlled United Spirits Ltd (USL) has reported an 18% drop in its June quarter net profit due to high raw material cost and lower sales, especially in Tamil Nadu.
For the quarter to end-June, the company once owned by United Breweries (UB) group’s Vijay Mallya, said its net profit fell to Rs118.13 crore from Rs144.6 crore even as its total revenues, including sales, increased to Rs2,270.4 crore from Rs2117.6 crore, same period a year ago.
Tamil Nadu continues to be a dampener on USL business and the company has blamed outside forces for the poor showing. “The ordering mechanism (in Tamil Nadu) is deliberately skewed to favour brands from select local vendors at the cost of the popular brands of USL. From a situation three years ago where one of every three bottles sold in Tamil Nadu was from the USL stable, the company share is now down to one out of every six bottles sold,” it said.
The company said its results were impacted by a sharp increase in the costs of its primary raw material, extra neutral alcohol (ENA) over last year. The increase of nearly Rs20 per case translates to an adverse impact of over Rs61 crore in the cost of goods sold. USL said, “The evident cartelisation by vendors when quoting for the ethanol supply tenders of the oil marketing companies is a pointer to further increases in the price of this key ingredient.”
USL said its main brands continue to perform well and grew 20% thus adding 1.34 million cases. These brands now represent over 26% of the overall volumes of USL compared to 22% for the comparable quarter and 23% for 2013 fiscal.
The No1 McDowell’s Whisky family has registered a healthy growth of around 25%. The Black Dog range has been embellished with the introduction of premium variants of the mother brand – Black Reserve, Gold Reserve and Triple Gold Reserve, in addition to the 21-Year Old Quintessence and 18-Year Old Reserve. These brands will be introduced gradually in key Scotch whisky markets.
During the quarter there were two key developments that took place which is of relevance to USL shareholders…
As a result of the above, and together with the shares tendered in the open offer by the public shareholders of the company, Diageo now holds about 25.02% stake in USL.
Unites Spirits closed Thursday marginally down at Rs2,390.7 on the BSE, while the 30-share Sensex also ended the day marginally down at 19,317.2.
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