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The standalone revenues were up asmart 23 per cent at Rs 1,242 crore - a part of the gains coming from the merger of Shaw Wallace and other operations. What was remarkable was the strong volume growth of 17 per cent with key brands growing 16 per cent, on the back of a 20 per cent volume growth in 2008-09. However, with molasses prices at Rs 600 per quintal, material costs to sales have increased more than 600 basis points year-on-year.

And though the strong brand portfolio allowed the company to save on advertisements and promotions, operating profit margins were lower at around 18 per cent. In a seasonally weak quarter, Whyte and Mackay reported astrong revenue growth of 10 per cent and a 36 per cent rise in the opertaing profit.

With scotch prices firm, there’s every chance that contracts being renewed next year will be done at significantly higher prices. In the current year, United Spirits is expected to turn in revenues in the region of Rs 6,500 crore and net profits of around Rs 430 crore. At the current price of Rs 918, the stock trades at 13 times 2009-10 estimated EV/EBITDA (enterprise value /earnings before interest, tax and depreciation) with reasonable upside.
source - BS

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United Spirits Ltd (updated - 29 April 2009)
After a disastrous December 2008 quarter, in which operating margins crashed 750 basis points because a delayed crushing season pushed up prices of molasses, United Spirits has turned in a decent set of numbers for the March 2009 quarter.

Standalone revenues were up just under 20 per cent at Rs 908 crore, though the operating profit margin fell 110 basis points to around16 per cent driving down the profit after tax by about 14.5 per cent to Rs 55.6 crore. As a result, net profit for 2008-09 fell just under 5 per cent to Rs 297 crore despite revenues having grown a smart 21.5 per cent.

Analysts estimate that Whyte and Mackay(W&M) — a scotch whisky firm that United Spirits acquired in May 2007 — will contribute to the consolidated numbers at the operating profit level but perhaps not at the net level. While prices of scotch have risen by about 30-40 per cent since the acquisition, the benefits to W&M would depend on the price at which it has entered into contracts — an estimated 70 per cent of its revenues are through contract sales. Also, it’s possible that consumption of scotch slows down globally in the current scenario and that prices correct, both of which could hurt W&M. The manage-ment has said that W&M is not a drag on the financials of the company, though only the audited numbers would give a clear picture.

This year, United Spirits is expected to turn in consolidated revenues of close to Rs 6,600 crore, arise of 17 per cent over last year, while earnings should grow by 15-16 per cent. The firm remains highly leveraged with an estimated net debt to operating profit at around 4.5 times. Of course, there’s treasury stock that can be sold and there has been talk of an equity stake sale to a strategic partner. The stock lost 4 per cent in Tuesday’s session and at Rs 710, trades at just under 19 times estimated 2009-10 earnings, which is not cheap. Some clarity on W&M’s financials would be useful.
source - BS

United Spirits Ltd (updated - 27 Aug 2009)
That Diageo will not be picking up a stake in United Spirits, just yet, is disappointing because it would have helped improve the company’s balance sheet. However, the Street doesn’t seem to be too worried — the stock has fallen by about 1.5 per cent in the last couple of sessions.

That’s probably because the company’s consolidated debt came down by about Rs 570 crore to around Rs 6,800 crore at the end of June 2009 with the liquor firm recently monetising treasury stock worth Rs 900 crore. It repaid $186 million (Rs 890 crore) of debt, which should save it $15-16 million on interest annually.

However the borrowings remain high and the company will probably sell the remaining treasury stock —8.3 million shares worth Rs 750 crore at the current market price — and also rope in a couple of private equity investors to mop up around $300 million.

Also, analysts are impressed with the June 2009 quarter numbers even though the net profit may have fallen 8 per cent yearon-year in the June 2009 quarter at Rs 108 crore due to high interest costs.

United Spirits Ltd (updated - 03 July 2009)
It’s obviously a good thing that United Spirits is deleveraging its balance sheet. The liquor firm has monetised treasury stock selling 1.24 crore shares at Rs 890 a share. That will fetch it nearly Rs 1,100 crore and if the company manages to mop up an equivalent amount of around Rs 1,200 crore through a placement to institutional investors, then the debt on the books, currently at Rs 7500 crore, will come down to Rs 5,000 crore. It’s certainly a good start to the deleveraging process and if the market wasn’t too enthused with the effort — the stock came off by nearly 5 per cent to Rs 873 — it’s because investors have been looking forward to a strategic sale of stock, namely a placement of shares with Diageo. The sale has been talked about for almost a year now but doesn’t seem to be reaching a conclusion.

Meanwhile, it’s business as usual with revenues at the Bangalore headquartered firm expected to be driven by about a 10 per cent growth in volumes in the next couple of years. It’s unlikely, say industry watchers, that prices can be upped by more than 2-3 per cent with some amount of resistance in key markets.

The concern in the near term is the high price of molasses - prices have crossed Rs 6000 a tonne which is higher than the average in 2008-09. That will pressure profitability and unless the company saves on other expenses such as trade discounts or packaging, operating margins for the domestic business, analysts say, could come in at around 17 per cent this year. The good news is that prices of scotch are up sharply and Whyte and Mackay, which United Spirits acquired in May 2007, will be renewing its contract with Diageo next year.

IDFC SSKI estimates revenues of close to Rs 6,500 crore in the current year for the firm over the Rs 5,439 crore posted last year, an increase of around 20 per cent. With some amount of deleveraging and savings, the growth in profits could be higher. While the company is a good longterm play on rising disposable incomes and aspirations, in the short term the huge borrowings at the group level are worrying.
source - BS

United Spirits Ltd (updated - 16 Sept 2009)
Poor performance from Whyte and Mackay and adverse foreign exchange movements pulled down United Spirits’ consolidated numbers for 2008-09. The liquor firm reported a loss of Rs 410 crore.

The Street had priced in profits of at least Rs 200 crore; adjusting for exceptionals, the loss came in at just under Rs 28 crore. Whyte and Mackay’s Ebitda (earnings before interest, tax, depreciation and amortisation) is estimated to have fallen by about 22 per cent, probably due to lower demand for scotch in a weak economic environment and higher expenses on advertising and raw materials. With W&M now contributing about 40 per cent of the consolidated Ebitda, a weaker-thanexpected performance is a cause for concern. Analysts were somewhat taken aback at the high interest bill of over Rs 700 crore as they had pencilled in a smaller number.

Given that a fair part of the company’s borrowings are denominated in the pound, which hasn’t appreciated vis-a-vis the rupee, the extent of the impact of the dollar’s appreciation was surprising. The consolidated profits were hit by non-cash expenses such as foreign exchange translational losses and actuarial losses on pensions; analysts point out the actuarial losses could recur.
However, United Spirits has been deleveraging the balance sheet; the consolidated debt at the end of June was lower at around Rs 6,800 crore after the company monetised treasury stock worth Rs 900 crore. Having repaid about $186 million (Rs 890 crore), it should save $15-16 million annually on interest.

Also, the stand-alone June 2009 quarter numbers were good even though the net profit may have fallen 8 per cent year-on-year, due to high interest costs. Revenues were up a smart 23 per cent at Rs 1,242 crore — a part of the gains coming from the merger of Shaw Wallace and other operations. What was remarkable was a strong volume growth of 17 per cent with key brands growing 16 per cent. This was on the back of a 20 per cent volume growth in 200809. Going ahead, high molasses prices are a concern. At the current price of Rs 888, the stock trades at close to 22 times estimated 2010-11 earnings.
source - BS

United Spirits Ltd (updated - 08 Dec 2009)
United Breweries (UBL), the owner of Kingfisher beer, yesterday reached a major milestone by signing a deal with Heineken NV, which like the Vijay Mallya group owns a37.5 per cent stake in UBL. The company concluded a licensing agreement to distribute Heineken, the largest global beer brand, in India.

Currently, Heineken sales in India are negligible and take place largely through duty-free zones. The deal will allow UBL to harness the opportunities in the premium-beer market in the country and earn additional income. Although other international competitors haven’t seen major success in the Indian markets, the UBL management believes it will emerge successful due to its extensive distribution network. Analysts believe that the move to have a big global premium brand in the portfolio is positive.

However, the benefits will only start flowing after Heineken is commercially rolled out in India, which is expected by mid-2010.
Importantly, the deal will enable UBL to significantly expand sales of its Kingfisher beer globally. Although the beer brand is already sold in some 55 countries, the company has lagged due to lack of a significant distribution network. It believes Heineken’s international network will fill the gap and help Kingfisher emerge as a truly global brand.

Meanwhile, UBL is growing faster than the industry, and gaining market share, which currently stands at around 50 per cent. Analysts expect UBL to report arevenue growth of 15-17 per cent and a net profit growth of over 40 per cent, led by improvement in margins, in 2009-10. Recently, UBL raised Rs 420 crore through a rights issue to fund its working capital and capital expenditure needs. Its new capacity of 12 million cases will be operational in January 2010 and will take the total to 130 million cases per year. The stock, which has risen almost 43 per cent in the last one month and is trading at 38 times 2010-11 estimated earnings, looks expensive at current levels.
source - BS