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Shares of United Spirits, the maker of Black Dog whiskey, fell as much as 5.6% on Wednesday after the spirits company reported a 28% drop in net profit.

Shares of the Diageo-owned company fell 5.6% to ₹770 each on the National Stock Exchange (NSE).

Whiskey maker Johnny Walker’s net profit fell 28% to Rs 214 crore during the third quarter of FY23 compared to Rs 295 crore in the corresponding fiscal period.

Earnings were dragged down by rising input costs. The company’s gross margin was 40.6%, 438 base points less than the previous year, driven by inflation in the costs of inputs for both glass and extra neutral alcohol (ENA).

EBITDA decreased to Rs 368 crore in the quarter ended December 31, 2022, down 12.38% year-on-year and EBITDA margin was 13.2%, down 332 basis points, mainly driven by inflation-driven contraction in gross margin.

The Bangalore-based Scotch whiskey maker’s total revenue fell to ₹6,631 crore in the third quarter of FY23 from ₹8,917 crore in the same period a year earlier.

“We delivered a good quarter in an extremely volatile environment by carefully navigating through route-to-market changes and input cost inflation,” says Hina Nagarajan, United Spirits CEO and CEO.

“The Board of Directors has approved a multi-year supply chain agility program. The program is expected to strengthen our end-to-end supply chain, making it fit for the future,” adds Nagarajan.

“Looking ahead, in the near term, we expect inflationary headwinds to continue. However, we remain optimistic about the medium- and long-term business outlook and our ability to seize growth opportunities with a sharper focus and our reshaped portfolio. We remain confident in our strategy to create an organization of the future and thereby deliver value to all our stakeholders in a sustainable and consistent manner,” says Nagarajan.

The board also approved the sale of its entire equity interest in its wholly owned subsidiary Sovereign Distilleries Limited. “The Company has entered into a definitive agreement for the sale of its entire equity interest in its wholly owned subsidiary Sovereign Distilleries Limited (“SDL”), to Mr. Girish Jain and Mr. M. Sukumar, the sole owner of Sri Lakshya Traders (collectively “Buyers”) for a consideration of INR 32 crore,” it says in a separate stock exchange filing.

The board also approved the appointment of Pradeep Jain, the company’s chief financial officer, as an additional director and a full-time director of the company effective February 1, 2023 for a term of five years.

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