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Unaudited financial results for the quarter ended 30 June 2020

27 Jul 2020 | Press release

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A quarter marred by COVID-19
Topline impacted by lockdowns, in addition, bottomline also impacted by one-offs

First quarter performance highlights:

• Reported net sales declined 54%, impacted by COVID-19 led lockdown that resulted in complete shutdown of business for more than a month, and only gradual resumption thereafter, notwithstanding other disruption caused by the corona outbreak. After adjusting for the one-time sale of bulk Scotch last year, underlying net sales declined 51%.

• Prestige & Above segment net sales declined 52%.

• Popular segment net sales declined 51% overall but declined 46% in priority states.

• Gross margin was 41.7%, down 567bps on reported basis, primarily driven by lower franchise income, COGS inflation, one-off obsolete inventory write-off during the quarter. After removing the one-time benefit of bulk Scotch sale last year, underlying gross margin decline was 508bps.

• EBITDA was negative at Rs. (78) Crores and EBITDA margin was (7.5)%, driven by contraction in gross margin, negative impact of operating leverage, and COVID induced ageing related provisions.

• Interest costs were Rs. 50 Crores, 4% lower than last year.

• Profit after tax was Rs. (215) Crores (net loss), versus Rs. 197 Crores in the same period last year.

Anand Kripalu, CEO, commenting on the quarter ended 30 June 2020 said:

"During the quarter, our business was severely impacted by COVID-19 led lockdown and the ensuing disruption. The business remained shut for more than a month during the quarter and it resumed only gradually thereafter, in line with varying state level restrictions. The on-premise channel continued to remain shut for the entire quarter. This resulted in a YoY sales decline of 51% on underlying* basis.

The Prestige and Above segment was disproportionately impacted by the closure of the on-premise channel and the drying up of social occasions for consumption. While it is too early to arrive at any conclusions, what we have seen is a sequential improvement month on month, notwithstanding the second wave of localized lockdowns which are having an impact on both our supply chain as well as retail outlets in July.

What I am particularly pleased about is the agility and nimbleness that our teams have shown in restarting and scaling up our operations in the face of several challenges across the entire supply chain. Additionally, we have also continued the roll out of the renovated bundles of McDowell’s No. 1 Whisky and Royal Challenge Whisky.

While we have been ruthless about discretionary costs, we have not shied away from investing and supporting our customers, consumers and communities as needed. In service of that, we have recently launched “Raising the Bar” programme, to support the revival and recovery of bars and restaurants that serve alcohol. The programme is aimed at providing the necessary non-cash support to help them reopen and welcome back consumers in a safe environment.

From a profitability perspective, zero sales for more than a month coupled with the negative impact of operating leverage, and certain one-off expenses like COVID led obsolete inventory and ageing based provisions severely impacted our profitability, resulting in a net loss for the quarter.

Looking ahead, we will have to navigate several unknowns over the course of this year, including state level lockdowns that are being re-imposed as well as the real impact of recent tax related price increases on demand. Hence, we will continue to evolve and dynamically manage the situation in the near term, while staying committed to investing for the success of our business and staying true to our longer-term strategy.

Note: *Underlying means after removing the one-off benefit of bulk Scotch sale in Q1F20.