Results announcement for Q1 2018

1 Aug 2018
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PAT increased 29% in the first quarter supported by robust sales performance First quarter performance highlights:

  • Reported net sales increased 13% as the business benefitted from lapping the impact of the highway ban in the same period last year and aided by improved performance in the Prestige and Above segment. Net sales excluding the one-off impact of operating model changes increased 14%.
  • Prestige & Above segment net sales grew 19%.
  • Popular segment reported net sales declined 3% due to the one-off impact of operating model changes. Net sales growth, after adjusting for the impact of operating model changes, was flat. Net sales of Popular segment in priority states grew by 7%.
  • Gross margin was 49.1%, up 313bps, mainly due to productivity gains and flow through effect of pricing that more than offset the adverse impact of inflation and GST. Underlying* gross margin improvement was 266bps.
  • Reported EBITDA was Rs. 192 Crores, up 22%, driven by increased gross profit, partially offset by one-off restructuring costs, increased marketing investment as well as higher overheads. Reported EBITDA margin was 9.6%, up 72bps. Underlying EBITDA, after adjusting for the operating model changes and one-off restructuring costs, increased 28% and underlying EBITDA margin at 11.3%, was up 127bps.
  • Interest costs were Rs. 56 Crores, 20% lower, driven by our continued focus on debt reduction, better negotiated rates and debt-mix.
  • Profit after tax was Rs. 81 Crores, up 29%.

 Anand Kripalu, CEO, commenting on the quarter ended 30 June 2018 said: "Our performance has continued to improve in the first quarter as the operating environment has become more stable. During the quarter, overall net sales growth excluding the impact of operating model changes was 14%, benefitting from lapping the impact of highway ban last year, while also driven by improved performance of the Prestige and Above segment.

The Prestige and Above segment performance was supported by robust performance of our Scotch portfolio with Johnnie Walker, Black & White and Black Dog showing strong momentum. Additionally, our renovated brands such as Signature and Royal Challenge continued to deliver strong growth, further validating the success of our renovation strategy.

 During the quarter, underlying* gross margin improved 266bps, driven mainly by savings from our productivity programme and pricing which more than offset the inflation and the adverse impact of GST. This quarter we significantly accelerated the investment behind our brands with marketing spend up 30% compared to last year as we activated behind the wide-reaching platforms provided by the IPL and FIFA World Cup.

Underlying* EBITDA margin for the quarter improved by 127bps as gross margin improvement was partially offset by the increased marketing investment.

Improved operating performance combined with lower interest costs have helped us deliver an overall PAT increase of 29% during the quarter.

Looking forward we will continue to focus on premiumisation, strengthening our brands and driving productivity while playing a leadership role in shaping the landscape of this industry. We are confident that given the long-term consumer opportunity for spirits in India combined with our leadership position, we are well placed to capture the growth in this industry. We reiterate our medium-term ambition to deliver double digit topline growth and improve margins to mid-high teens."