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United Spirits profit soars in first half of 2018

Diageo-controlled Indian drinks group United Spirits saw its 2018 first half net sales grow by 14%, while profit after tax increased by more than 50%.

United Spirits, producer of Royal Challenge Indian whisky, has reported a 57% profit after tax increase in H1

In the six months to 30 September 2018, net sales hit Rs. 4,240 crores, while profit after tax grew by 57% to Rs. 340 crores.

The net sales growth was attributed mostly to the ‘prestige and above’ segment, as well as the “improved performance” of the ‘popular’ segment and the benefit of a “low comparative” following the highway ban last year.

Net sales of USL’s ‘prestige and above’ portfolio increased by 19% while the ‘popular’ segment grew by 5%.

The company’s premium and luxury portfolio was boosted by “premiumisation efforts”.

Within Scotch, Johnnie Walker and Black & White both showed “robust growth”, bolstered by activations that included a new visual identity of Johnnie Walker and the first TV advertisement for Black & White.

In the ‘prestige’ segment, key brands including Indian whiskies Signature and Royal Challenge delivered “strong growth”.

“We continued to deliver a strong performance with a second consecutive quarter of double-digit sales growth,” said CEO Anand Kripalu.

“On the profitability front, I am pleased that we have delivered robust gross margin improvement both in the quarter as well as the first half, driven mainly by savings from our productivity programme, which more than offset the adverse impact of inflation.

“Investing behind our brands continues to be an area of focus for us, with reinvestment rate increasing to 9.7% in the first half, versus 8.2% in the same period last year.

“Improved operating performance combined with lower interest costs have helped us deliver an overall profit after tax increase of 57% in the first half.

“We continue to focus on our strategic priorities to capture the long-term opportunity in the spirits market and achieve our medium-term ambition to grow top line by double digits consistently and improve EBITDA margin to mid-high teens.”

In April last year, United Spirits’s former chairman Vijay Mallya was arrested and then bailed after appearing in a London court.

Mallya resigned as chairman and non-executive director of Diageo-owned Indian drinks group United Spirits in February 2016, following a vote of no confidence from his own board.

The years-long saga has resulted in Diageo suing Mallya through the High Court in London for at least US$180 million.

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