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United Spirits Limited (USL), the Bangalore-based India's largest spirits company, today reported 19% decline in net profit to Rs 118 crore for the first quarter ended June 30, 2013 compared to Rs 145 crore reported in the corresponding quarter last fiscal.
The company is engaged in the manufacture, purchase and sale of beverage alcohol (spirits and wines).
Net sales for the quarter went up Rs 6.5% to Rs 2,207 crore. The operating profit for the quarter witnessed a decline of 16.5% to Rs 293 crore.
The reconstituted board of directors of the company met for the first time here on Wednesday and approved the results.
During the quarter, the strategic brands of the company grew 20% and added 1.34 million cases. These brands now represent over 26% of the overall volumes of USL compared to 22% for the comparable quarter and 23% for fiscal 2013, the company said in a statement.
Interest costs for the quarter are down around 4% representing the benefit of repayment of Rs 1,600 crore of loans at the end of May 2013 from the proceeds of the issue of preference capital. Further reduction in interest costs is likely during the rest of the fiscal, it said.
The results have been impacted by a sharp increase in the costs of its primary raw material - Extra Neutral Alcohol (ENA) - over the comparative period of the previous fiscal. The increase of nearly Rs 20 per case translates to an adverse impact of over Rs 61 crore in the cost of goods, which flows down to the operating profit line, the company said.
"The evident cartelisation by vendors when quoting for the ethanol supply tenders of the Oil Marketing Companies is a pointer to further increases in the price of this key ingredient," the company said.
Similarly, higher expenditure on IPL 6 that took place during the first quarter led to a 150 basis points increase in advertising and sales promotion expenditure.
"Tamil Nadu continues to be a dampener on USL business with the ordering mechanism deliberately skewed to favour brands from select local vendors at the cost of the popular brands of USL. From a situation three years ago where one of every three bottles sold in Tamil Nadu was from the USL stable, the USL share is now down to one out of every six bottles sold," the company statement said.
Strategic brands of the company continue to perform well. The No.1 McDowell's whisky family has registered a healthy growth of close to 25%. The DietMate series, which incorporates an ingredient developed through a patented process of the Vittal Mallya Scientific Research Foundation, now has three brands under its belt - Royal Challenge DietMate whisky, No.1 McDowell's DietMate whisky and Bagpiper DietMate whisky. These are gradually being rolled out nationally at prices that are at a premium to the mother brands, the statement added.
