United Spirits Q1FY13 Earnings Conference Call - July ... - UB Group

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United SpiritsJuly 31, 2012capital requirements during the quarter. We have taken many steps to ensure that during thecurrent year there is not much of an expansion in working capital by tightening our bills interms of credit controls etc; we expect almost about 150-200 crores of debtors has to be I meanmonitored and reduced during the current year, so that that much of money can flow into thesystem for managing the working capital much better and so that there is no increasedborrowing on account of working capital. That is what we are tying to do we are put in placevery stringent credit control and I am sure that it will stand in as good stead as we go alongduring the year.Coming to the main subsidiary Whyte & Mackay you would see Whyte and Mackey net salehas dropped to 33 million, from about 37 million and EBITDA has dropped to about 1.9million pounds from 4 million pounds and PBT is loss against break-even last first quarter. Thisis more a timing issue, I would like to reiterate that over the year Whyte & Mackay will getback to the EBITDA level anywhere between 30-35 million pounds I mean during the currentyear also. We have been selling very small parcels of bulk which were there last year andwhich will be there this year with succession of timing and therefore I wouldn't go, I mean, toomuch into the first quarter results of Whyte & Mackay at this point of time and I am alsoconfident that I will go along from second and third quarter onwards we will get back to ourcontribution levels of 26% as compared to 14% that is reported in the first quarter and theEBITDA margin will definitely improve beyond the 11%, I mean, that is the stated year. Sothat is more on the timing issue. But as long as the stock level in Whyte & Mackay isconcerned they still hold almost about 96 million liters of alcohol which as of June almostabout 97 million liters of alcohol as of 30 th June, valued at 531 million pounds by an externalvaluer which shows almost about 81% growth over the stock level on per OLA basis comparedto the value of liquid in May 2007 when we acquired Whyte & Mackay. So there has been anintrinsic growth in the value of the liquid even though we have sold very valuable liquid toDiego in between which was under a contract and therefore this shows that there is an intrinsicvalue growth as far as the liquid is concerned even though the average age of the liquid mighthave come down after we sold valuable liquid in between under contracts That is about theoperating performance of first quarter of USL and its main subsidiary and on the debt level. Asregards the current year outlook as Mr. Capoor explained yes we have taken some priceincreases during the first quarter but we have not taken all of the price increase we probablyhave taken our plan is to take price increase to the extend of almost about 370 crores during thecurrent year out of which probably about 70-80 crores of price increase is yet to be taken andmost of the 270 crores price increase has taken between May and June for the full import of theprice increase will be felt in the quarters going forward and this price increase is as Ashok saidwithout talking about Andhra and we expect Andhra and Kerala price increases to fructify. Infact Kerala, has notified the price increase yesterday about 6% price increase that was onexpected level. In Andhra it is expected to declare the price increases towards the end of thisquarter. So we should have better realization and through price increases during this yearcompared to last year. We have taken almost about 25% more price increases this yearPage 6 of 20
United SpiritsJuly 31, 2012compared to that year and therefore that should stand as good stead around 300-370 crores ofprice increase compared to last year.As long as outlook on cost side on ENA is concerned, yes the first quarter was being benign,we expected the same, the trajectory to continue but now that the monsoon failed we don'tknow what impact it is going to have in the third and fourth quarter. But in 2009 whenmonsoon failed we did not see much of the impact on the price. So going by that experience weexpect that it should not impact too much, but nevertheless one does not know the governmentpolicies if in case the lack of monsoon and lack of products impact on the availability of liquid,we still expect the prices not to be worse than last year in the third and fourth quarter which isabout 160-163 level. Otherwise, we expect a better ENA price which at this point in time weare unable to predict given the current situation in terms of monsoon etc, we would be in abetter position to give you a reasonable estimate of how this is going to be when the crushingstarts in the third quarter, by the end of the second quarter when we speak about the secondquarter results we should be in a fairly better position to predict how the ENA prices willbehave for the next two quarters. But however, the current quarter is going to be a tough onewith the expectation of failed monsoon etc, prices where tending to go up as we speak, butnevertheless we are watching it closely as of now as against the last average of about Rs. 150etc we are almost about Rs.3-4 more at this point in time; we expect that to continue for the restof the quarter and as regards to glass, we don't expect any huge price increase in fact we areexpecting some reduction if in case because the new furnaces are being fired out-late and thereis some capacity which has come up in Andhra which should stand us in good stead in terms oftrying to negotiate prices better as we go along. Nevertheless, I don't expect a huge priceincrease on glass. So with glass and ENA the position that they are in we don't expect huge costpush, otherwise from other material packing material or consumable and therefore almost aboutin excess of 15-16% of Prestige and above brand growth with price increase which easilycontributes almost about 4% of net sale revenue compared to earlier year; we expect a decentmargin growth to be maintained during the rest of the period current year and we should endthe year with much healthier than the 14% that we reported in terms of the EBITDA margincompared to last year full years margin.That is the commentary on the financials and the outlook for the current year. We can takequestions and remarks.Moderator:Thank you very much. Ladies and gentlemen we will now begin the question and answersession. The first question is from Abneesh Roy from Edelweiss. Please go ahead.Abneesh Roy:My first question is on the gross margin expansion, what are the margins in below Prestigesegment and what is the capacity utilization we have in the factories currently. Last 3 or 4quarter, volume growth has been in single digit. So can this number go down further, so someclarity on what exactly you mean by premiumization and why we are doing that. That is thefirst question sir.Page 7 of 20
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United Spirits Q1FY13 Earnings Conference Call - July ... - UB Group

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