The share price of Diageo-backed United Spirits tumbled over 6 percent on January 25, a day after its Q3 net profit tanked 64 percent year-to-year (YoY) to Rs 110 crore on lower top line and weak operating performance.
Revenue from operations in October-December 2022 quarter declined to Rs 2,781 crore as against Rs 2,880 crore in the year-ago period, United Spirits said in a regulatory filing.
The stock closed at Rs 766 apiece on the NSE, down by 6.2 percent amid high volumes of 4.4 million shares. The stock is down 11 percent year-to-date and its 52-week low is Rs 712.
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At the operating level, earnings before interest, taxes, depreciation and amortization (EBITDA) fell 25.6 percent YoY to Rs 367.8 crore. EBITDA margin fell to 13.2 percent against 17 percent in the year-ago period.
"During the quarter, the company recognised a provision of Rs 148 crore under exceptional items, towards the impairment loss on property, plant and equipment covered under the programme by writing down their carrying amounts to net realizable values," United Spirits said in an exchange filing.
Meanwhile, gross margin at 40.6 percent fell 438 basis points versus last year, driven by input cost inflation both for glass and ENA (extra neutral alcohol). ENA is the primary raw material for making alcoholic beverages.
“We delivered a good quarter in an extremely volatile environment. This is the first quarter post the slump sale and franchising of the strategically reviewed 'Popular' portfolio," Hina Nagarajan, Managing Director & CEO, United Spirits said.
In May 2022, United Spirits had announced the sale of 32 brands including Haywards, Old Tavern, and White Mischief to Inbrew for Rs 820 crore. For the quarter gone by, rebased net sales for 'Popular' segment grew 2.3 percent YoY.
Prestige & Above segment net sales grew 11.7 percent with strong double-digit growth in the Scotch portfolio.
Along with Q3 results, the Board of Directors also approved a multi-year supply chain agility programme. The programme is expected to strengthen our end-to-end supply chain thereby making it fit for the future. This is in addition to our everyday efficiency savings, the company said.
Looking ahead, in the shorter term, Nagarajan expects inflationary headwinds to continue. "However, we remain optimistic about the medium to longer term business prospects and our ability to harness growth opportunities with sharpened focus and our reshaped portfolio," she said.
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