Liquor firm United Spirits Ltd today reported 18.50 per cent decline in net profit at Rs 118.13 crore for the first quarter ended June 30, 2013, mainly on account of increase in raw material prices.
United Spirits Ltd had posted a net profit of Rs 144.95 crore during the same period of previous fiscal.
Net sales of the company, however, rose to Rs 2,192.35 crore for the first quarter, as against Rs 2,057.29 crore during the same period of previous fiscal, United Spirits Ltd (USL) said in a filing to the BSE.
"The results have been impacted by a sharp increase in costs of its primary raw material 'extra neutral alcohol' over the comparative period of previous fiscal," it added.
The increase of Rs 20 per case translates to an adverse impact of over Rs 61 crore in the cost of goods which flows down to the operating profit line, the company said. "The evident cartelisation by vendors when quoting for the ethanol supply tenders of the oil marketing companies is a pointer to further increase in the price of this key ingredient," United Spirits Ltd said.
Similarly, the expenditure on IPL 6 that took place during the first quarter led to a 150 basis points increase in advertising and sales promotion expenditure, it added. The company said that Tamil Nadu continues to be a dampener on its business with the ordering mechanism deliberately skewed to favour brands from select local vendors at the cost of the popular United Spirits Ltd brands.
"From a situation three years ago where one of every three bottles sold in Tamil Nadu was from USL stable, the USL share is now down to one out of every six bottles sold," the Bangalore-based firm said.
Strategic brands of the company, including the No 1 McDowell's whisky, have grown during the period, it added. "During the first quarter of fiscal 2014, the strategic
brands of the company grew 20 per cent and added 13.4 lakh
cases. These brands now represent over 26 per cent of the overall volumes of USL, compared to 22 per cent for the comparable quarter," USL said.
Last month, the world's largest spirits maker Diageo Plc acquired 25.02 per cent stake in USL for a total consideration of Rs 5,235.85 crore, on completion of a share purchase deal announced last year.