Consolidation boosts United Spirits profit

BS 200 SCORECARD

United Spirits (USL) posted a 13-fold jump in net profit to Rs 342.53 crore for the third quarter ended December 31, 2006, from Rs 26.17 crore registered in the corresponding quarter of the last financial year.

This quantum jump is the result of consolidating the various spirits companies including Shaw Wallace under a new company "� United Spirits.

USL almost doubled its net sales to Rs 773 crore for the third quarter backed by sales of its key brands that have been consistently recording double-digit growth. EBIDTA too moved up smartly "� by almost three times "� as synergies of the merger kicked in.

According to USL, various synergy opportunities had been identified at the time of the acquisition of Shaw Wallace.

"The company started realising the synergies soon after the acquisition in June 2005 with some 'quick-wins'. The process continues even today in the areas of price increases, cost decreases through strategic and combined buying efforts, reduction in market spends and elimination of duplicate infrastructural facilities in the areas of manufacturing, manpower and sales offices," USL said in a statement.

The company further said furnace oil prices had seen a downturn since September last year. "Consequently and combined with the crushing season for molasses now underway, there has been a softening in the price of the company's primary raw material "� molasses/rectified spirit. The exception to this has been Tamil Nadu where supply was severely affected. The rates of spirits in the forthcoming quarters are expected to be stable and lower than third quarter," the company added.

For the nine months ended December 2006, its key brands posted a growth of 18 per cent to clock 45.9 million cases. Overall volumes were at 49.8 million cases, which represents 9 per cent growth over the last year figure.

Sales of key profitable brands "� McDowell's No.1, Antiquity Blue, Signature, White Mischief, Romanov, Royal Challenge and Bagpiper "� consistently maintained double-digit growth.

The share of the mainline brands in the total USL portfolio is now over 92 per cent, up from 72 per cent in 2001-02, following a deliberate strategy to emphasise value rather than volume.