United Spirits Limited · NSE:UNITDSPR
United Spirits — FY2020 Earnings Presentation
46 slides from United Spirits's earnings presentation, Jun 1, 2020
Slide 1: Anand Kripalu, Managing Director & CEO
ANAND KRIPALU MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER
Slide 2: What we will cover today
WHAT WE WILL COVER TODAY FY20 PERFORMANCE FY20 KEY HIGHLIGHTS COVID & BEYOND 2
Slide 3: Sanjeev Churiwala, Executive Director & CFO
SANJEEV CHURIWALA EXECUTIVE DIRECTOR & CHIEF FINANCIAL OFFICER 01 JUN 2020 3
Slide 4: What we will cover today
WHAT WE WILL COVER TODAY FY20 PERFORMANCE FY20 KEY HIGHLIGHTS COVID & BEYOND 4
Slide 5: FY20 – A year of continued macroeconomic slowdown
FY20 – A YEAR OF CONTINUED MACROECONOMIC SLOWDOWN… India GDP Trajectory 8.2% 7.1% 7.2% 6.8% 4.2% Q1 5.2% Q2 4.4% Q3 4.1% Q4 3.1% FY16 FY17 FY18 FY19 FY20 Source: MoSPI 5
Slide 6: F20 in a nutshell
F20 IN A NUTSHELL Net sales1 +1.2% Prestige & Above net sales +0.4% Gross margin 44.8%; (408)bps EBITDA margin2 16.6%; +223 bps Interest costs -13% Profit after tax 705 Cr; +7% 1 Underlying net sales growth was (1.5)%, excluding one-off bulk Scotch sale. 2 Underlying EBITDA margin excluding one-off
Slide 7: Topline impacted by consumption slowdown & COVID-19 led disruption
TOPLINE IMPACTED BY CONSUMPTION SLOWDOWN & COVID- 19 LED DISRUPTION Reported net sales up 1.2% Rs Crore 248 ( 192 ) 58 9,091 8,981 4 Underlying* net sales down 1.5% F19 FY Bulk Scotch sale Net impact of Volume Price/mix F20 FY Reported operating model changes Reported Reported net sales % Underlying
Slide 8: EBITDA margin expansion despite an unprecedented environment
EBITDA MARGIN EXPANSION DESPITE AN UNPRECEDENTED ENVIRONMENT 14.9%* 14.3% (408)bps 169bps 186bps 275bps 16.6% 15.9%* Rs Crore 231 1,506 1,340 (317 ) 161 143 1,402 1,287 Reported EBITDA margin up 223bps Reported Underlying EBITDA margin up 92bps Underlying F19 FY Gross profit Marketing Staff costs Ot
Slide 9: PAT growth of 7%, PAT margin expansion of 42bps
PAT GROWTH OF 7%, PAT MARGIN EXPANSION OF 42BPS 7.3% 223bps (56)bps (89)bps 35bps 31bps (102)bps 7.8% Rs Crore 219 ( 50 ) ( 83 ) 28 ( 97 ) 29 705 659 F19 FY EBITDA Other income Depreciation Interest cost Exceptional Tax F20 FY Reported saving items Reported
Slide 10: Continued focus on cash management
CONTINUED FOCUS ON CASH MANAGEMENT Rs. Crore 224 (32) (242) 1,506 12 (34) (191) (566) (210) (492) 51 27 Opening cash EBITDA Sale Repayment Other income Working Lease Interest Tax payment Capex Debt Closing cash F19 proceeds of from /expense capital payment expense repayment F20 FY non core subsidiar
Slide 11: Further progress on deleveraging
FURTHER PROGRESS ON DELEVERAGING Net debt Interest Cost Reduction of Rs. 492 Cr. Interest cost saving of Rs. 29Cr. 7.6% 7.0% 2,589 Rs Crore Rs Crore 220 2,073* 191 F19 FY F20 FY F19 F20 *Closing balance is net of finance lease reclassification impact of Rs. 24 Cr due to IndAS 116. Pure debt repaymen
Slide 12: Sustained improvement in key financial indicators
SUSTAINED IMPROVEMENT IN KEY FINANCIAL INDICATORS Return on Capital Employed Debt-Equity ratio Interest Coverage ratio 1.3 6.9 23% 22% 5.6 19% 0.8 4.1 0.5 F18 F19 F20 F18 F19 F20 F18 F19 F20
Slide 13: Continuing to create value for our shareholders
CONTINUING TO CREATE VALUE FOR OUR SHAREHOLDERS EPS Rs/share Up 478% 9.7 9.1 7.7 2.3 1.7 F16 FY F17 FY F18 FY F19 FY F20FY * EPS has been retrospectively adjusted for the 1:5 stock split that became effective in F19
Slide 14: What we will cover today
WHAT WE WILL COVER TODAY FY20 PERFORMANCE FY20 KEY HIGHLIGHTS COVID & BEYOND 14
Slide 15: Further progress against each of our strategic priorities in FY20
WE HAVE MADE FURTHER PROGRESS AGAINST EACH OF OUR STRATEGIC PRIORITIES IN FY20 To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship
Slide 16: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 16
Slide 17: Playing into India's top passion points
PLAYING INTO INDIA’S TOP PASSION POINTS Food Cricket Travel Black & White Royal Challenge Johnnie walker 17
Slide 18: Driving purpose-led campaigns via influencer led approach
DRIVING PURPOSE-LED CAMPAIGNS VIA INFLUENCER LED APPROACH JOHNNIE WALKER #THETRAVELLINGBILLBOARD AN ICON STRIDES ACROSS UNCHARTERED LOCATIONS IN INDIA 18
Slide 19: The Royal Challenge relaunch
THE ROYAL CHALLENGE RELAUNCH 19
Slide 20: New No.1 whisky you already love
NEW No.1 WHISKY YOU ALREADY LOVE
Slide 21: Hipster and McDowell's Platinum update
HIPSTER AND MC DOWELL’S PLATINUM UPDATE Innovation in Action Scotch Hipster Mc Dowell’s No1 Platinum 21
Slide 22: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 22
Slide 23: Optimally serving the three Indias
OPTIMALLY SERVING THE THREE INDIAs AFFLUENT INDIA MIDDLE INDIA ASPIRING INDIA Deliver unique, curated Leverage outlets to build brand Focus on retained states, experiences equity & aid premiumization support franchisees “Horses for Courses”-led front line sales force optimization Leveraging technolo
Slide 24: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 24
Slide 25: Sustained productivity across all lines of the P&L
SUSTAINED PRODUCTIVITY ACROSS ALL LINES OF THE P&L Productivity Initiatives FY20 • Efficiencies through modernization/automation and Footprint transformation Contribution to COGS • Imports value chain optimization and Logistics efficiency INR - Margin Gross 70 Cr. improvement +77bps • Rate and featu
Slide 26: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 26
Slide 27: Changing the narrative for Alco-Bev
CHANGING THE NARRATIVE FOR ALCO-BEV Shape Regulatory Environment Changing Industry Reputation Road Safety partnerships with States, UTs • Pricing: Realizing pricing across states; structural pricing unlocks • Shifting Narrative: Leading the effort to establish an economic narrative for Alco-Bev Enri
Slide 28: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer products companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 28
Slide 29: Building a future-ready organization
BUILDING A FUTURE-READY ORGANIZATION • Succession planning for critical • Co-creation driven by high leadership roles performance culture and employee • Accelerate internal pipeline trust readiness for senior positions Talent implications for delivering strategic priorities • Strengthen “people mana
Slide 30: We have reasons to celebrate and matters to resolve
WE HAVE REASONS TO CELEBRATE AND MATTERS TO RESOLVE Happy About Do Better 1. Margin improvement in a difficult 1. Performance in select state-brand environment combinations 2. Relaunch of McDowell’s No.1, Royal 2. Pricing & Market Access in key states Challenge 3. Commodities cost – volatility and 3
Slide 31: What we will cover today
WHAT WE WILL COVER TODAY FY20 PERFORMANCE FY20 KEY HIGHLIGHTS COVID & BEYOND 31
Slide 32: The coronavirus pandemic brought unprecedented turmoil to an already distressed situation
THE CORONAVIRUS PANDEMIC BROUGHT UNPRECEDENTED TURMOIL TO AN ALREADY DISTRESSED SITUATION Source: CNBC TV18 article dated May 28, 2020; https://www.cnbctv18.com/economy/how-badly-will-lockdown-impact-indias-gdp-growth-heres-what-top- brokerages-say-6019041.htm 32
Slide 33: Alco-Bev sales were severely impacted by the lockdowns
ALCO-BEV SALES WERE SEVERELY IMPACTED BY THE LOCKDOWNS Essential Goods sales like food, groceries, home and personal care, medicines allowed (online and offline) International Travel banned Bars / Pubs / Restaurants closed Alco-Bev Manufacturing Operations banned Alco-Bev Manufacturing Operations st
Slide 34: Our response to the COVID crisis is anchored on two key objectives
OUR RESPONSE TO THE COVID CRISIS IS ANCHORED ON TWO KEY OBJECTIVES Manage the Crisis Emerge Stronger 34
Slide 35: We set up a Crisis Management Team to manage the crisis
WE SET-UP A CRISIS MANAGEMENT TEAM (CMT) TO MANAGE THE CRISIS… Crisis Management Team Daily senior leadership and key stakeholder check ins to review REPORT AS AT 0800H ON 18 MAY 2020 COVID-19 CASES - INDIA Pandemic trajectory COVID-19 CASES - WORLD Health and well-being of our people Date Posit
Slide 36: ...and defined 6Cs of COVID crisis management
…AND DEFINED 6Cs OF COVID CRISIS MANAGEMENT 1. Care 4. Customer 2. Communication 5. Cost 3. Consumer 6. Cash 36
Slide 37: Prioritize people: care & communication
PRIORITIZE PEOPLE: CARE & COMMUNICATION Caring for Our Community THE BIG IMPACT: ENHANCING REPUTATION AGILITY, SPEED & COLLABORATION – ALL FOR A Boost in reputation NATIONAL CAUSE 37
Slide 38: Prioritize people: care & communication
PRIORITIZE PEOPLE: CARE & COMMUNICATION Caring for Our Employees Communication Safety Wellbeing Internal External Virtual engagement across all levels of the organization Routine updates on status of operations, supply etc. Inviting ideas Bi-weekly “All Employee” webinars Regular email com
Slide 39: Monitor the market: consumer & customer
MONITOR THE MARKET: CONSUMER & CUSTOMER Consumer Behaviour Customer Engagement Monitoring weekly consumer sentiment evolution (across CPG categories) 1. Plan Alco-Bev specific consumer behaviour survey Syndicated studies related to impact of 2. Execute Covid on CPG and Retail Rapid field fee
Slide 40: Safeguard financials: cost & cash
SAFEGUARD FINANCIALS: COST & CASH Optimize Cost Conserve Cash Dramatically re-prioritize & re-allocate Single-minded focus on receivables and spends based on ROI managing credit, advances Dial up productivity initiatives across all Rigorously manage inventory at lines of the P&L corporations
Slide 41: Never let a good crisis go to waste
“Never let a good crisis go to waste” ~Winston Churchill 41
Slide 42: Opportunities & challenges for Alco-Bev in the short to medium term
OPPORTUNITIES & CHALLENGES FOR ALCO-BEV IN THE SHORT TO MEDIUM TERM Opportunities Challenges Home Delivery / Online Ordering Aggressive taxation Advantage Spirits Down-trading Duty-free ----> Duty Paid On-Premise sales Shifting Narrative on (Alco-Bev’s) economic Impact of adjacent sector performance
Slide 43: Our response in the short to medium term
OUR RESPONSE IN THE SHORT TO MEDIUM TERM Strategic Choices Business Partnerships Supply Chain Regulatory Readiness Interventions End-to-end Unequivocal Demand-driven Relentless Industry- Portfolio play support to key Supply led advocacy customers (off- ROI based trade and on- Innovative
Slide 44: While the short to medium term outlook remains uncertain
WHILE THE SHORT TO MEDIUM TERM OUTLOOK REMAINS UNCERTAIN… 44
Slide 45: ...We have reason to be optimistic
…WE HAVE REASON TO BE OPTIMISTIC Consumer Opportunity Long-Term Premiumization Category Resilience 32.5% 26.8% 2005 2030 Affluent Households by annual income 18.0% (>Rs. 25 lakhs) 1% 7% 7% 44% 12.0% 12.0% 9.8% 9.8% Middle 8.8% 8.4% 7.7% 7.9% 7.9% 7.9% 8.1% 7.7% 7.9% 8.5% 8.9% (Rs.2.5-25 lakhs) 5.2%
Slide 46: Thank you
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