United Spirits profit climbs on premium liquor demand in third quarter

India's United Spirits, which makes Smirnoff vodka, reported a rise in third-quarter profit on Tuesday, buoyed by strong demand for its premium brands of alcohol.

A greater number of affluent Indians are choosing more expensive cars and consuming pricier food and liquor, unaffected by inflation.

This boosted the Diageo PLC-owned company's profit before exceptional items and taxes by 51% to 4.59 billion rupees ($55.22 million) in the quarter ending Dec. 31 from a year earlier.

Last year, the company had made a provision of 1.48 billion rupees as an exceptional item for costs related to a revamp of its supply chain.

 

Sales in United Spirits' premium segment, which includes brands such as Johnnie Walker, Signature and Antiquity and accounts for roughly 80% of its net sales, rose 4.6% in the quarter.

Meanwhile, inflation and increased competition curbed sales of the lesser-priced 'popular' segment, which includes McDowell's No. 1, Vat 69 and Royal Challenger brands. Sales in the segment fell nearly 23% in the quarter.

Revenue rose around 5% to 69.49 billion rupees. Revenue had fallen in each of the earlier four quarters.

The company benefited from softer input costs for glass, packing materials, and barley, reducing raw material costs by 7%.

However, expenses for extra neutral alcohol, a key ingredient, remain a millstone around liquor makers' necks, analysts have said.

Rival Radico Khaitan, which makes Magic Moments vodka, will report its third-quarter results next month.