United Spirits reports 19.4% drop in net profit in December quarter to 649.2M Indian rupees, citing weak demand, increase in ingredient costs; revenue up 4.8% to 2.31B rupees

NEW DELHI , February 13, 2014 () – India's largest liquor company United Spirits Ltd ( USL ) reported a 19.4% drop in net profit to Rs. 64.92 crore for the December quarter because of weak demand and an increase in ingredient costs.

Revenue in the quarter rose 4.8% to Rs.2,308.6 crore.

Cost of materials consumed jumped 17.4% to Rs.1,338.7 crore in the quarter.

USL, which is now controlled by UK-based distiller Diageo Plc, has been among the worst-hit by a slowdown in India's liquor sales. So far this year, USL sales volume have dropped 2% while the industry together has grown by 1% or so.

Mint reported earlier this week that USL cut prices of two key liquor brands, McDowell's No.1 and Royal Challenge, in several states as it sought to regain market share from rivals that have grown faster this year.

USL rivals including Kishore Chhabria-promoted Allied Blenders and Distillers Pvt. Ltd, Tilaknagar Industries Ltd, Radico Khaitan Ltd and French distiller Pernod Ricard have all taken market share from the Bangalore-based distiller this fiscal year, when liquor volume growth has dipped to its lowest in a decade, Mint reported in November.

In the December quarter, USL's pricier brands reported a sharp slowdown in volume growth to 12% from 21% in the preceding quarter. The company's inexpensive brands including Bagpiper had already been seeing a drop in demand for over two years.

USL said in a statement that the company was now looking at a combination of price increases, cut in marketing spending and cost savings to help offset an increase in the price of extra neutral alcohol (ENA), a key ingredient.

The company also said that it was in the process of selling "stipulated assets" of its Whyte and Mackay whisky business in the UK. USL said it may complete a sale by the coming April-June quarter.

In November, the UK's competition authority, the Office of Fair Trading (OFT), raised concerns about the impact of Diageo's acquisition of USL on whisky prices in that country.

Shares of USL closed down marginally at Rs.2,363.55 on Thursday on the BSE. The Sensex fell 1.25% to 20,193.35 points. Published by HT Syndication with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at htsyndication@hindustantimes.com

(c) 2014 HT Media Limited

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.