Unaudited Financial Results For The Quarter and Nine Months Ended 31 December 2019
PAT grew 35% during the quarter
Third-quarter performance highlights:
• Net sales grew 3%; exhibiting an improving trend over the previous quarter, but still impacted by the broader consumption slowdown.
• Prestige & Above segment net sales grew 8%, albeit on a high comparative.
• Popular segment net sales declined 5% overall, led by a decline of 4% in priority states.
• Gross margin was 44.4%, down 421bps versus last year, primarily due to the adverse impact of COGS inflation.
• Reported EBITDA was Rs. 424 Crores, up 18%. Despite significant gross margin compression, EBITDA margin was 16.4%, up 207bps, primarily delivered through savings in operating costs and to a lesser extent by a lower marketing reinvestment rate.
• Interest costs were Rs. 46 Crores, 21% lower than last year.
• Profit after tax was Rs. 259 Crores, up 35%; PAT margin was 10.0%, up 232bps.
Nine months performance highlights:
• Reported net sales grew 5%; underlying net sales excluding the one-off benefit from bulk Scotch sale grew 3%, primarily impacted by general elections in the first quarter and thereafter by consumption slowdown combined with liquidity tightness in the trade channel, notwithstanding a high comparative last year.
• Prestige & Above segment net sales grew 6%, lapping a high comparative of last year.
• Popular segment reported net sales declined 2%. Underlying net sales excluding the impact of operating model changes declined 1%. Net sales of Popular segment in priority states were flat.
• Gross margin was 45.5%, down 413bps versus last year, primarily due to significant COGS inflation. After adjusting for the bulk Scotch sale, underlying gross margin was 45.4%, down 426bps.
• Reported EBITDA was Rs. 1235 Crores, up 23%; reported EBITDA margin was 17.4%, up 248bps despite significantly lower gross margin; delivered mainly through savings in operating costs and to a lesser extent by lower reinvestment rate. After adjusting for the one-off impact of bulk Scotch sale and restructuring costs, underlying EBITDA increased by 11% and underlying EBITDA margin was 16.6%, higher by 118bps.
• Interest costs were Rs. 143 Crores, 11% lower than last year, mainly due to lower debt.
• Profit after tax was Rs. 681 Crores, up 28%; PAT margin was 9.6%, up 168bps.
Anand Kripalu, CEO, commenting on the quarter and nine months ended 31 December 2019 said:
"We saw a sequential improvement in the current quarter with overall sales growing 3%, led by our Prestige and Above portfolio growth of 8%, even as the broader consumption slowdown continued to weigh on the overall business.
We are particularly encouraged to see some momentum in our Prestige and Above portfolio, a sharp improvement from the previous quarter, when the segment hadn’t grown, in part due to our internal operational challenges. Additionally, during the quarter, we saw a return of premiumisation trend, with each sub-segment growing faster than the one beneath it, and especially with our Scotch brands showing strong growth.
During the third quarter, we continued to experience substantial inflation in our key raw material costs. While this resulted in significant compression in gross margin, we still delivered an EBITDA margin of 16.4%, up 207bps. More importantly, we also delivered an EBITDA margin expansion during the first nine months of this fiscal year, underlining our ability to manage all lines of the P&L to deliver margin.
The marketing reinvestment rate for the quarter was 9.7%, bringing the reinvestment rate for this fiscal to 8.4%, within our guided range for the year.
Overall, we delivered a PAT of Rs. 259 crores during the quarter, up 35%. The PAT for the first nine months of the year came in at Rs. 681 crores, up 28%.
We are optimistic that the economy will gradually recover, and with that, the business should bounce back more strongly. We remain committed to our medium-term ambition of growing the top line by double digits and to improve EBITDA margin to mid-high teens.”