United Spirits (UNITDSPR) Q4 07/08 earnings summary

Executive summary

• FY08 brand sales rose 11% and sales income reached Rs 31,731 million, up 17%; premiumization supported profitability amid steep input-cost inflation.

• Consolidated results include the May 2007 acquisition of Whyte & Mackay and other subsidiaries; FY08 figures are not comparable with FY07.

• First-half FY09 growth was strong: sales grew 17% YoY, while first-half profits were 26% higher than the corresponding FY08 period.

Financial highlights

• Standalone operating profit was Rs 5,175.774 million, up from Rs 3,898.186 million; profit before tax before exceptional items was Rs 4,849.662 million.

• Standalone PAT was Rs 3,112.759 million versus Rs 4,940.194 million; FY07 included a Rs 2,627.424 million exceptional and other non-recurring credit.

• Consolidated total income was Rs 47,338.424 million versus Rs 30,493.752 million; net profit was Rs 2,720.584 million versus Rs 5,669.523 million.

• Consolidated PBT was Rs 5,673.294 million versus Rs 7,156.563 million; FY07 included Rs 3,134.686 million of prior-period, exceptional and other non-recurring credits.

Outlook and guidance

• Directors expected continued profitable demand growth from India’s young population and rising disposable income, but warned that input inflation and an economic downturn could pressure profitability.

• Strategic purchasing, price increases, cost reduction and other mitigation measures were expected to support higher profits despite recessionary conditions.

• Whyte & Mackay prospects were supported by higher Scotch prices; Bouvet Ladubay and Four Seasons were positioned to benefit from growing wine demand.

• Price increases remained difficult in markets reliant on government buying agencies; Tamil Nadu allowed increases, while Andhra Pradesh continued to deny reasonable inflation-linked increases.