INDIA – The board of directors of United Spirits Limited (USL), a subsidiary of British multinational alcoholic beverage company, Diageo, has approved the sale of all equity shares held by the company in its non-operative wholly owned subsidiary – Sovereign Distilleries (SDL) for Rs 32 crore (US$3.9m).
The company has entered into a definitive agreement with the buyer. Upon completion of the above sale, SDL will cease to be a subsidiary of the company.
The divestment follows a reported fall in profits by 64.4% in quarter 3 occasioned by soaring input costs, falling sales, and a one-time expense.
The Indian alcoholic beverages company posted a profit of 1.11 billion rupees (US$13.61 million) in the quarter that ended Dec. 31, down from 3.11 billion rupees in the previous year.
The maker of Johnnie Walker whiskey also suffered a revenue fall of 25% to Rs 66.12 billion in the quarter, while net sales fell nearly 10% to 2.78 billion rupees. The company said it incurred a onetime expense of Rs 1.51 billion, while its input costs rose 4.6%.
The sales of the Prestige and Above segment grew 11.7 percent, with double-digit growth in its scotch portfolio. The rebased net sales for the popular segment grew 2.3 percent.
EBITDA stood at ₹368 crore with a reported EBITDA margin of 13.2 percent, down by 332bps, primarily driven by inflation led to gross margin contraction partly offset by targeted advertising and promotional (A&P) calibration.
Gross margin was at 40.6%, down 438 bps YoY, driven by input cost inflation both for Glass & ENA, partly offset by superior mix and productivity.
Hina Nagarajan, Managing Director, and CEO said: “We delivered a good quarter in an extremely volatile environment carefully navigating through Route to Market changes and input commodity cost inflation. This is the first quarter post the slump sale and franchising of the strategically reviewed popular portfolio.” During the quarter, the company completed the merger of Pioneer Distilleries Limited to progress towards a simplified legal entity footprint.”
“Looking ahead, in the shorter term, we do expect inflationary headwinds to continue. However, we remain optimistic about the medium to longer-term business prospects and our ability to harness growth opportunities with a sharpened focus, and our reshaped portfolio.”
The Bengaluru-based scotch maker had sold 32 brands in May last year, including Haywards and Old Tavern, to Inbrew Beverages on a slump sale basis.
The company is also among beer makers in India which penalized Rs 873 crore (approx. US$105.5 million) by the fair-trade regulator CCI (Competition Commission of India) for cartelization in the sale and supply of beer in India on Sept. 24 last year.
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