Millennium Post
Business

High raw material prices sink United Spirits profit by 18%

Liquor firm United Spirits on Thursday reported 18.50 per cent decline in net profit at Rs 118.13 crore for the first quarter ended 30 June, 2013, mainly on account of increase in raw material prices.

The company had posted a net profit of Rs 144.95 crore during the same period of previous fiscal. Net sales of the company, however, rose to Rs 2,192.35 crore for the first quarter, as against Rs 2,057.29 crore during the same period of previous fiscal, United Spirits Ltd (USL) said in a filing to the BSE.

'The results have been impacted by a sharp increase in costs of its primary raw material 'extra neutral alcohol' over the comparative period of previous fiscal,' added United Spirits Ltd.

The increase of Rs 20 per case translates to an adverse impact of over Rs 61 crore in the cost of goods which flows down to the operating profit line, the company said.

'The evident cartelisation by vendors when quoting for the ethanol supply tenders of the oil marketing companies is a pointer to further increase in the price of this key ingredient,' USL said.

Similarly, the expenditure on IPL 6 that took place during the first quarter led to a 150 basis points increase in advertising and sales promotion expenditure, it added.The company said that Tamil Nadu continues to be a dampener on its business with the ordering mechanism deliberately skewed to favour brands from select local vendors at the cost of the popular USL brands.
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