United Spirits on a high after good Q3 performance

United Spirits jumped 4.9% to Rs 604 after the company announced robust Q3 numbers after market hours on Monday, 27 January 2020.

On consolidated basis, United Spirits' net profit rose 15.3% to Rs 235.30 crore in Q3 December 2019 (Q3 FY20) as against net profit of Rs 202.99 in Q3 December 2018 (Q3 FY19). Profit before tax (PBT) for Q3 December 2019 stood at Rs 314 crore, up by 8.2% against Rs 290.30 crore in Q3 December 2018. Tax expenses declined 26.2% to Rs 94.90 crore in Q3 FY20 from Rs 128.60 crore in Q3 FY19.

Net sales rose 2.9% to Rs 2587.60 crore on year-on-year (YoY) basis. The company said that although net sales exhibited an improving trend, it was impacted by the broader consumption slowdown.

Gross margin stood at 44.4%, down 421 basis points (bps) versus last year, primarily due to the adverse impact of Cost of goods sold (COGS) inflation.

Reported EBITDA for Q3 December 2019 stood at Rs 424 crore, up 18% YoY. Despite significant gross margin compression, EBITDA margin was 16.4%, up 207 bps, primarily delivered through savings in operating costs and to a lesser extent by a lower marketing reinvestment rate.

Commenting on company's Q3 performance, Anand Kripalu, CEO, United Spirits 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. 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. Overall, we delivered a PAT of Rs. 259 crores during the quarter, up 35%. 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.

United Spirits, a Diageo Group company, is an Indian alcoholic beverages company, and the world's second-largest spirits company by volume.

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