United Spirits rallies 10% on improved EBITDA margins

The stock rallied 10% to Rs 2,305 on BSE in intra-day trade on back of heavy volumes.

United Spirits rallied 10% to Rs 2,305 on BSE in intra-day trade after the company said its Ebitda (earnings before interest, tax, depreciation and amortization) margin improved by 739 bps to 13.1% in March quarter (Q4FY17).

The company said margin improvement driven by increased gross profit margin, lower operating expenses and provision made in the same period last year.

The country’s largest liquor manufacturer United Spirits posted a net loss of Rs 104 crore in Q4FY17, on account of an “exceptional charge” of Rs 291 crore towards a customer claim arising out “legacy commercial terms. The company had reported a profit of Rs 1.4 crore in year ago quarter.

The company said that its profit before tax before exceptional items in Q4FY17 stood at Rs 152 crore against Rs 77 crore in previous quarter. Total income from operations in the period under review grew 9.22% to Rs 6,485 crore as compared with Rs 5,937 crore in the same year ago period.

“The continued focus on premiumisation, price increases in select states and productivity initiatives helped us to offset inflation and delivered higher gross margin, as well as Ebitda margin during the fiscal,” said Anand Kripalu, CEO, United Spirits.

While the longer term consumer opportunity remains strong for spirits, we expect that the highway ban will continue to impact performance in short term. Meanwhile, he said that while alcohol for human consumption has been excluded from GST, the additional tax on input materials and services will result in stranded taxes, and impact margins, added Anand Kripalu.

At 10:54 am; the stock was up 9% at Rs 2,278 on BSE as compared to a marginal 0.03% rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 1.55 million shares changed hands on the BSE and NSE so far.