Thread by @MlnDollarMinds

#UnitedSpirits (UNSP)

Management ConCall held on 24 May 2021 after 4QFY21 - Key Takeaways

Source - Yes Securities

Time for thread 👇🏻👇🏻👇🏻

@dmuthuk

https://twitter.com/mlndollarminds/status/1396033996820078593?s=21

(1/n)

Management Update – Hina Nagarajan will take charge as New MD & CEO from 1st July 2021. Prior to this, she was MD at Africa regional markets at Diageo, 30 years of experience in CPG businesses & worked with various organizations like Nestle, RB, Mary Kay India.
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2/n

P&A segment–Adjusting for ₹2.5bn revenue of Scotch in Q4FY20, revenue grew ~31% implying strong resiliency of the brands. Scotch segment grew double digit, fastest growing business in portfolio, offset by contraction of owned business in AP, unwinding of franchise business
3/n

Brands portfolio – Several initiatives were taken 2 uplift the visibility & brand saliency through new commercial advertisements for Johnnie Walker, Black & White & other brands; available across all country platforms, association with RCB helped enhance visibility of brands
4/n

Alcohol industry - behaved as semi essential category and recovered better than non-essential categories.

5/n

Productivity – revenue management through premiumization led better mix, price hikes, cost optimization and debt reduction helped optimize cash management.
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6/n

Gross margin outlook - may decline in coming quarters from the current levels due to inflation in input costs and lower demand for the products led by Covid-led lockdown and higher taxes.
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7/n

Update on A&P spends and Other expenses - A&P spend 90bps lower in FY21, expect 8-9% as % of sales in FY22. Other expenses stood at 4.5% in Q4FY21; expect it to be 5-6% as % of sales going forward.

8/n

Net working capital efficiency –improved to 26% from 30% as % of sales in FY20 driven by improvement in receivables and marginally higher inventory.

9/n

Debt Repayment – Significant debt reduction in FY21 of ~Rs1500cr to Rs556cr driven by healthy FCF generated in the business and improvement in working capital. D/E stood at 0.13 vs 0.35 in FY20.

10/n

Franchise update – South India business is the biggest part of franchise income, AP is the big component of that, been stable in FY21 except Q1FY21 as there was no business due to complete lockdown

11/n

Ethanol blending policy – don’t know when new ethanol blending policy will be announced but company is increasing its own distillation capacity to hedge against uncertainty around the policy

12/n

Excise tax update – there is no adverse impacts on operations due to excise taxes, company will be discussing on prices with Karnataka govt. in July 2021

13/n

Corporate update – will be reducing the hierarchy levels from 16 to 9 levels, highest level of employee engagement through digital platforms during the crisis

14/n

Outlook – Many states are completely shut like Maharashtra creating consumption barrier; barring some supply challenges, company is well positioned to capture the recovery cycle on the back of strong resiliency of the brands.

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