Audited financial results for the quarter and financial year ended 31 March 2019
EBITDA grew 25% in the full year
Fourth quarter performance highlights:
• Net sales grew 4%; primarily impacted by excise policy changes in a couple of our key states.
• Prestige & Above segment net sales grew 8%, on a higher than normal comparative last year.
• Popular segment reported net sales declined 2%. Underlying* net sales declined 1%. Net sales of Popular segment in priority states declined 7%.
• Gross margin was 46.5%, down 344bps versus last year, primarily due to the adverse impact of COGS inflation as well as due to part-absorption of excise duty hike in Maharashtra. Underlying* gross margin decline was 356bps.
• Reported EBITDA was Rs. 284 Crores, up 3%. EBITDA margin was 12.6%, down 8bps, mainly driven by gross margin erosion versus last year, partly offset by phasing effect of marketing investment and operating leverage. Underlying* EBITDA increased 8% and underlying* EBITDA margin improved by 52bps.
• Interest costs were Rs. 61 Crores, almost flat versus last year.
• Profit after tax was Rs. 126 Crores, down 40%, despite improved EBITDA, primarily driven by significantly lower other income and negative movement in exceptional items versus last year.
Full year performance highlights:
• Net sales grew 10%, as a result of double-digit growth in the Prestige & Above segment as well as benefitting from a lower base, which was impacted by the highway ban last year.
• Prestige & Above segment net sales grew 15% with 3ppts positive price/mix.
• Popular segment reported net sales remained flat. Underlying* net sales grew 1%. Net sales of Popular segment in priority states grew by 1%.
• Gross margin was 48.8%, up 21bps, as productivity related savings offset the significant adverse impact of inflation. Underlying* gross margin was almost flat.
• Reported EBITDA was Rs. 1,287 Crores, up 25%; reported EBITDA margin was 14.3%, up 175bps, primarily driven by operating leverage, which more than offset a 9% increase in marketing investment. Underlying* EBITDA was up 25% and underlying* EBITDA margin was 14.9%, up 174bps.
• Interest costs were Rs.220 Crores, 18% lower than prior year, driven by lower debt and active debt management.
• Profit after tax was Rs.659 Crores, up 17%; PAT margin was 7.3%, up 46bps.
*Underlying sales adjusts for the one-off impact of operating model changes. Underlying margin excludes the one-off impact of operating model changes and/or one-off restructuring costs.
Anand Kripalu, CEO, commenting on the quarter and full year ended 31 March 2019 said:
"It was a good year with sales growing 10%, notwithstanding a low comparative. However, our business was impacted in the current quarter by excise policy changes in a couple of our key states. During the year, our Prestige & Above portfolio performed well, growing 15%, albeit on a low base. Popular segment on the other hand remains challenged, growing 1% for the full year, after a decline of 4% last year, adjusted for the operating model changes.
We made further progress in our journey to drive premiumization with the Prestige & Above segment now accounting for 66% of sales. Furthermore, within the overall P&A segment, we saw each sub-segment growing faster than the one beneath it. Notably, our Scotch portfolio grew almost twice as fast as the overall Prestige & Above portfolio, with Johnnie Walker and Black & White both showing strong momentum.
On profitability, despite facing significant raw material inflation in the last two quarters, we marginally improved the gross margin versus last year, primarily through productivity related savings.
We have also continued to invest behind our brands with marketing investment up 9% during the year.
Despite only a marginal gross margin expansion and increased marketing investment, we delivered 175bps EBITDA margin expansion for the year through operating leverage.
Improved operating performance, combined with our sustained focus on reducing interest costs have enabled us to deliver a PAT growth of 17% for the year.
Overall, in this fiscal, we have delivered strong top line growth while continuing to premiumize our mix. We have also delivered EBITDA margin expansion despite significant inflationary pressure on our raw materials; while simultaneously enhancing investment behind our brands. All the lines of our P&L are moving in the right direction and we have made tangible progress towards our medium-term ambition of double-digit top line growth and mid-high teens EBITDA margin."