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Informist, Thursday, Oct. 24, 2024

By Steffy Maria Paul and Anshul Choudhary

MUMBAI – United Spirits Ltd. said it continued to feel the impact of a slowdown in consumer demand during the September quarter that had played out in the previous few quarters as well. This slowdown even affected growth in its top-end products, which were a major driver of growth in the past several quarters. During the quarter, growth in the top-end products was slower than the middle-end products, the company said in a post-earnings analyst call.

In the latest quarter, the net sales value of the 'prestige and above' segment of United Spirits, which accounted for around 89% of its Jul-Sept sales, was broadly flat. Moreover, the net sales value of its 'popular segment' declined 6.9% on year. The company's lower-end segment also continues to reel under inflationary pressures, United Spirits said. For the quarter, the net sales value was down 0.8% on year.

Owing to this, the company's revenue from operations for the quarter fell 0.9% on year to INR 66.7 billion. The company said it is a couple of percentage points behind where it would have wanted to be with regard to top line growth at the end of the six months ended September. However, the company is hopeful that the second half of this financial year will be much better than the past six months. It expects stable demand in the middle-end and believes that the slower growth in the top-end products is a blip. The top-end segment will outperform other segments in the coming quarters, the company management said.

"H1 (Apr-Sept) of fiscal 2025 has been weak, but we remain optimistic on the upcoming festive season and H2 (Oct-Mar)...," the management said. The company also remains optimistic about their double-digit growth aspirations for their 'prestige and above segment' in 2024-25 (Apr-Mar). "However, to confirm any recovery with confidence, it will be prudent to wait with cautious optimism for the next couple of quarters to play out," the company said.

The company said it believes if the Oct-Dec season shapes well, it will be on-track to continue to deliver double-digit growth in its 'prestige and above segment'. Talking about the impact of Karnataka cutting excise duty slabs for liquor, United Spirits said its 'prestige and above' segment forms a very small part of the market in Karnataka, and that despite the price cuts for the portfolio, the prices in the state are still higher than in other markets.

United Spirits said it expects Andhra Pradesh to account for 4.0-4.5% of the national sales of its 'prestige and above' segment in the next 18 to 24 months. The company has re-entered the Andhra Pradesh market after five years; most major liquor brands had exited the state following changes to the then government's liquor policy in 2019. 

The company said once it achieves sustained high teen margins, its margin expansion will moderate significantly. United Spirits' earnings before interest, tax, depreciation, and amortisation margin for the quarter was 17.8%.

The company said sales growth in towns outside the metros has outperformed the metro cities for the last few quarters, and that it expects the trend to continue. Without identifying the state, the company's management said it faced constraints in ease of doing business in a key state in the north. The company expects the slowdown in receiving permits in the state to continue and said that the disruption would continue to impact United Spirits' performance in the coming quarters.

After market hours Wednesday, United Spirits had reported a profit after tax of INR 3.4 billion for the September quarter, down 1.8% on year. Its revenue from operations was INR 66.7 billion, down 0.9% on year. Net sales value, which is the actual revenue of the company after deducting excise duty and other minor overheads, was INR 28.4 billion, down 0.8% on year. The Street had anticipated the company's net profit at INR 3.3 billion, and revenue at INR 29.7 billion. On Thursday, shares of United Spirits closed at INR 1,459.70 on the National Stock exchange, down 0.5%.  End

Edited by Ashish Shirke

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