Audited Financial Results For The Quarter and Financial Year Ended 31 March 2020
EBITDA margin expanded despite a multitude of headwinds during the year
Full year performance highlights:
• Reported Net sales grew 1.2%, primarily due to a broad-based consumption slowdown during the year and further impacted by COVID-19 led disruption in March. Underlying net sales, excluding the one-off sale of bulk Scotch, declined 1.5%.
• Prestige & Above segment net sales was flat with 1.9ppts positive price/mix.
• Popular segment net sales declined 4.1% overall but declined 1.5% in priority states.
• Reported Gross margin was 44.8%, down 408bps, impacted by significant COGS inflation versus last year. Underlying Gross margin, excluding the one-off sale of bulk Scotch was 44.8%, down 404bps.
• Reported EBITDA was Rs. 1,506 Crores, up 17%; reported EBITDA margin was 16.6%, up 223bps, despite a substantial gross margin compression as that was more than offset through significant savings in operating costs and to a lesser extent through lower marketing investment. After adjusting for the one-off impact of bulk Scotch sale and restructuring costs, underlying EBITDA was up 4.6% and underlying EBITDA margin was 15.9%, up 92bps.
• Interest cost was Rs.191 Crores, 13.3% lower than last year.
• Profit after tax was Rs.705 Crores, up 7%, despite a one-time tax charge and exceptional items in the current year.
Fourth quarter performance highlights:
- Reported net sales declined 11.4%; primarily due to COVID-19 led disruption in India in March, which exacerbated the impact of the ongoing consumption slowdown. Underlying net sales, excluding the one-off sale of bulk Scotch, declined 14.8%.
- Prestige & Above segment net sales declined 15.6%, disproportionately impacted by drying up of social occasions and closure of on-premise channel in several states even before the national lockdown went into effect.
- Popular segment net sales declined 11.4% overall but declined 5.4% in priority states.
- Reported Gross margin was 42.2%, down 433bps, primarily due to COGS inflation as well as the dilutive impact of the last tranche of bulk Scotch sale. Underlying gross margin excluding the one-off sale of bulk Scotch was 42.9%, down 364bps.
- Reported EBITDA was Rs. 271 Crores, down 4.3% driven by lower sales, partly offset through savings in operating costs and lower marketing investment. Reported EBITDA margin was 13.6%, up 101bps. After adjusting for the one-off impact of bulk Scotch sale and restructuring costs, underlying EBITDA declined 16.2% and underlying EBITDA margin was 13.2%, down 21bps.
- Interest cost was Rs 48 Crores, down 20.7%.
- Profit after tax was Rs. 24 Crores, down 81%, primarily due to exceptional items and a one-time tax charge.
Anand Kripalu, CEO, commenting on the quarter and full year ended 31 March 2020 said:
"The business was severely impacted in the fourth quarter due to disruption caused by the outbreak of coronavirus in India. Net sales declined 11%, led by a larger decline in the Prestige and Above segment, further impacting full year growth, which was already subdued due to the ongoing consumption slowdown during the fiscal.
We saw a sharp deceleration in our Prestige and Above portfolio from the previous quarter, as the segment was disproportionately impacted by the closure of on-premise channel in several states much before the nationwide lockdown went into effect. Within the segment, our Bottled in Origin (BIO) Scotch portfolio was the hardest hit. Although the roll-out of the renovated McDowell’s No. 1 Whisky brand was interrupted, we are encouraged by the initial consumer response in places where it was completed.
During this fiscal, we experienced substantial inflation in our key raw material costs. While this resulted in significant compression in gross margin, we still delivered an underlying* EBITDA margin of 15.9%, up 92bps, reflecting our agility and dynamic approach towards managing various lines of the P&L.
Overall, despite an unfavourable environment, impacting both the demand and the cost of raw materials, PAT for the year was up 7%.
Overall, in this fiscal, we faced several external challenges, including the general election, broad based economic slowdown and the outbreak of coronavirus. While the outlook for next year remains uncertain, I am confident in the resilience of our category and our agility and ability to adapt in this difficult environment. We will continue to execute with discipline and invest prudently to meet evolving consumer needs."