27 OCT 2016
27 OCT 2016 Press release
Unaudited financial results for the quarter and 6 months ended 30 September 2016 Press Release
Net sales up 8%, PAT up 53% in the first half
- Net sales growth of 7% in the second quarter; 8% growth in the first half
- Excluding the impact of the alcohol consumption ban in Bihar, net sales growth of 9% in the second
quarter; 11% growth in the first half
- Prestige & Above segment net sales up 12% in the second quarter moderated with the Diageo brands
portfolio being fully organic; Net sales growth of 16% with 5ppts positive price/mix in the first half
- Net sales of the Popular segment declined 3% in the second quarter and declined 5% in the first half
impacted by the Bihar prohibition. Priority states grew volumes and net sales in the segment
- Gross margin of 42.5% flat in the second quarter due to pressure from input cost inflation; gross margin of
42.9% in the first half increased by 81bps driven by premiumisation and productivity
- Marketing investment up 47% in the second quarter and 24% in the first half due to lower reinvestment rates last year. Overall reinvestment rate of 7.3% in the first half
- EBITDA Rs. 208 Crore, down 34% in the second quarter and Rs. 406 Crore, down 19% in the first half driven by additional tax levies, one off impact and increased marketing investment. Underlying EBITDA declined 17% in Q2 and 3% in H1 excluding one off impact
- EBITDA margin of 10.2% in second quarter, down 626bps, and 9.9% in the first half, down 337bps, driven by additional tax levies, one off impact and increased marketing investment. Underlying EBITDA margin of
11.6% in the second quarter and 11.2% in the first half excluding one off impact
- Interest cost Rs. 88 Crore in the second quarter and Rs. 191 Crore in the first half, lower by 20% driven by
both debt reduction and favourable rates
- Profit after tax Rs. 83 Crore, up 16% in the second quarter and Rs. 126 Crore, up 53% in the first half
Anand Kripalu, CEO, commenting on the six months ended 30 September 2016 said:
"These set of results continue to demonstrate that we have the right strategy in place with strong focus on premiumisation coupled with selective participation in popular. We have increased our investments behind our power brands and our strategic priorities which led to strong top line performance. We also invested in organisational changes which will enable us to capture future growth.
The Prestige & Above segment performance remained robust and grew net sales by 16% in the first half fuelled by our renovation and premiumisation strategy. Signature returned to growth in Q1 post renovation and grew net sales by 16% in the first half. The McDowell’s No.1 whisky brands (excluding Platinum) net sales was up 10% in the first half post renovation and Royal Challenge grew net sales 28% despite lapping a strong growth following the re-launch in 2014. The Prestige & Above segment now represents 57% of the overall business.
We have however faced industry challenges in the second quarter which negatively impacted the bottom line. Introduction of the Local Body Tax in Maharashtra and other indirect taxes negatively impacted EBITDA. We have taken price increases effective from 1st October to offset the Local Body Tax. We have made interventions to shape our business which have had a one off impact on EBITDA. Route to market changes in Punjab in the second quarter had a negative impact on performance.
Several challenges we have faced last year are now behind us and we have seen good growth in some states and partial recovery in others. Uttar Pradesh has rebounded and continued to show strong growth post the excise duty reduction.
Haywards returned to growth in Q2 and delivered 27% net sales growth in the first half. Price increase in Karnataka positively impacted top line.
Continued focus on interest cost reduction through a combination of debt reduction and lower interest rate, coupled with lower tax cost and exceptional items led to 53% increase in PAT in the first half.
These results give me confidence that the interventions we have made to shape the business to drive future growth will deliver strong and sustained performance in the coming years."
Diageo is a global leader in beverage alcohol with an outstanding collection of brands across spirits and beer categories. These brands include Johnnie Walker, Crown Royal, J&B, Buchanan’s and Windsor whiskies, Smirnoff, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.
Diageo is a global company, and our products are sold in more than 180 countries around the world. The company is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO).
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