United Spirits (UNITDSPR) Q4 05/06 earnings summary

Executive summary

• FY06 spirits sales reached 59.4m cases after major mergers; market leadership, scale benefits and premium-brand growth lifted profitability. The comparisons are affected by the merger and demerger effective from April 1, 2005.

• Expansion beyond India began with the Bouvet Ladubay winery acquisition in France; Russia and China were identified as international priorities.

Financial highlights

• Net sales were Rs 1,380 crore, up 19% YoY, versus Rs 1,155 crore in FY05, as highlighted in the annual overview.

• Post-merger revenue from operations was Rs 33,409m, up 94% on reported comparisons; management cited estimated gross turnover above Rs 53,357m including tie-up and franchise sales.

• On a comparable aggregated basis, EBITDA was Rs 2,588m, up 186% from Rs 906m; operating profit rose 90% YoY.

• Standalone PAT was Rs 420.2m and EPS Rs 4.80 versus Rs 267.3m and Rs 5.17; periods are not directly comparable after the scheme.

• Consolidated PAT was Rs 1,269.4m and EPS Rs 16.58 versus Rs 124.2m and Rs 2.40; results include newly acquired subsidiaries and merger effects.

Outlook and guidance

• Directors expected good prospects in FY07 barring exceptional circumstances; profits for the six months to September 2006 were double the prior-year period.

• Profitability was expected to keep rising, but at a slower pace, with price increases, cost control and procurement synergies key to offsetting constraints.

• Management anticipated continued premium trading-up and growth from young demographics, while expecting greater competition from international spirits majors.

• International plans included expanding Bouvet Ladubay distribution, introducing its products in India in bottled-in-origin form and developing a winery in Western India.