31 DEC 2016
31 DEC 2016 Press release
Unaudited financial results for the quarter and nine months ended 31 December 2016
Net sales up 6%, PAT up 129% in the nine months
- Net sales growth of 3% in the third quarter slowed down due to de-monetization; Net sales growth of 6% in the nine months
- Prestige & Above segment net sales up 12% with 6ppts positive price/mix in the third quarter. Net sales growth of 16% with 7ppts positive price/mix in the nine months
- Popular segment net sales declined 6% in the third quarter and declined 5% in the nine months impacted by the Bihar prohibition. Priority states grew volumes and net sales in the segment
- Gross margin of 42.9%, up 262bps in the third quarter driven by positive price/mix and productivity initiatives; Gross margin of 42.9% in the nine months, up 152bps
- Marketing investment up 6% in the third quarter and 16% in the nine months
- EBITDA Rs. 294 Crore, up 10% in the third quarter driven by top line growth and lower staff costs. EBITDA Rs. 700 Crore, down 9% in the nine months driven by increased marketing investment, additional tax levies and one off impact. Underlying EBIDTA was flat excluding the one off impact
- EBITDA margin of 11.8% in third quarter, up 74bps driven by gross margin improvement and lower staff costs. EBITDA margin of 10.6% in the nine months, down 180bps, driven by increased marketing investment, additional tax levies and one off impact. Underlying EBITDA margin of 12.3% in the third quarter and 11.6% in the nine months excluding one off impact
- Interest cost Rs. 92 Crore in the third quarter lower by 14% and Rs. 284 Crore in the nine months lower by 18% driven by both debt reduction and favourable rates
- Profit after tax Rs. 148 Crore, up 296% in the third quarter and Rs. 274 Crore, up 129% in the nine months
Anand Kripalu, CEO, commenting on the nine months ended 31 December 2016 said:
"We have delivered a strong net sales growth of 6% despite the subdued economic environment in the third quarter due to de-monetization. Althought our third quarter net sales growth of 3% has been directly impacted by de-monetization, I am pleased that we have been able to manage through this period better than our initial expectations. This growth was underpinned by our continued focus on premiumisation, increased investments behind our power brands and our selective participation in popular.
The Prestige & Above segment performance remained robust and grew net sales by 16% fuelled by our renovation and premiumisation strategy and has remained at double digits through this challenging quarter. Momentum continued on Signature post renovation with net sales up 31%. McDowell’s No.1 whisky brands (excluding Platinum) grew net sales by 11% and Royal Challenge grew net sales 23% post renovation.
In line with our strategy to selectively participate in the popular segment we have entered into agreements to franchise selected Popular brands in Andhra Pradesh, Puducherry, Goa, Andaman and Nicobar and Kerala effective from January. These changes were made to further improve our operating model and focus our business on the biggest growth opportunities.
Continued focus on premiumisation, price increases in select states and productivity initiatives helped us to offset inflation and led to 152bps improvement in gross margin. We have delivered underlying EBITDA margin of 11.6% excluding one off impact which is in line with our expectation.
Our focus on interest cost reduction, coupled with lower tax cost and exceptional items resulted in a robust PAT growth of 129%. Improvements in our overall financial position has led to a further upgrade in our long term credit rating from A+ to AA with positive outlook, which will enable us to further decrease interest costs in the future periods.
However, we continue to face challenges in the regulatory environment in certain states. Tax and excise changes in Maharashtra, West Bengal and Telangana have led to sharp consumer price increases and the route to market changes in Punjab continues to impact performance. Although we expect the impact of de-monetization to abate as we move into the next quarter, the recent Supreme Court judgement on liquor outlets near highways remains a risk and adds some uncertainty for the future periods.
The overall results are very pleasing, especially in the current enviornment and gives me confidence that we are making the right choices and decisions to drive sustained growth and performance in the coming years."
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