the power of leadership presentation to analysts and investors 10 th august 2007, mumbai

The Power of LeadershipThe Power of Leadership

Presentation to Analysts and InvestorsPresentation to Analysts and Investors

10th August 2007, Mumbai


Highlights

Main line Brands @ 16.8 Mio. Cases grew 16% >

Previous Year +2.30 Mio. Cases

Overall sales @ 18.1 million cases -

growth 13% +2.10 Mio. Cases

Rs.Cr Rs.Cr Grwth %

J une'04 20.26 J une'05 35.69 76%

Sep'04 19.63 Sep'05 36.74 87%

Dec'04 24.50 Dec'05 51.19 109%

Mar'05 25.30 Mar'06 49.27 95%

J une'05 35.69 J une'06 77.47 117%

Sept'05 122.17 Sept'06 239.41 96%

Dec'05 204.74 Dec'06 381.08 86%

Mar'06 258.75 Mar'07 491.38 90%

J un'06 104.49 J un'07 174.23 67%

Period ending

Q/E

USLMcD

Growth in EBIDTA continues ……


Q1’08 - Financials

Q1'08 Q1'07 FY'07

Net Sales/Income from Operations 765.70 654.94 2,711.94Other income 4.86 3.56 53.03

Cost of Goods Sold 386.61 50% 356.50 54% 1399.10 52%Staff Cost 47.79 6% 42.53 6% 174.99 6%Advt & Sales Promotion 70.20 9% 51.43 8% 295.56 11%Other Overheads 99.69 13% 105.42 16% 400.13 15%Exchange - (Gain) / Loss (7.96) (5.43) 3.80

E B I D T A 174.23 23% 104.49 16% 491.38 18%

Interest / Finance Charges (Net of receipts) 29.21 4% 25.46 4% 103.09 4%

Depreciation 6.98 5.96 31.11

Profit Before Non-recurring Items & Tax 138.04 18% 73.07 11% 357.18 13%

Non-recurring items (Net) - - 265.67

Profit Before Tax 138.04 73.07 622.85

Tax 50.46 27.94 125.35

Net Profit after Tax 87.58 45.12 497.50

Rs Crores


Debt Position

* Without considering 13.75 mio shares of USL (Treasury Stock ) currently valued atRs. 1850 Crs

*

Rs. Crs

Term Loans 616

Whyte & Mackay acquisition Loan- - With recourse to USL 2,511 - Without recourse 2,633

Working Capital Loans 450

Fixed Deposits 78

Unsecured Loans (incl FCCB's) 160 6,448

Less: Cash & Cash Equivalent 430

Net Debt 6,018

Blended Cost of Debt (%) 8.48

Comparative Performance with the nearest domestic competitor

Q1'08 v Q1'07

17%

4%

67%

89%

8%2% 1%

-3%-20%

0%

20%

40%

60%

80%

100%

Net S

ales G

rowth

Gross

Mar

gin Im

prov

emen

t

EBIDTA

Gro

wth

PBT Gro

wth

Parameters

%

USL Nearest Competitor

Policy Change Impact

1. Karnataka - ‘Arrack’ ban

implemented effective

1st July

2. UP – Creation of ‘Private’

wholesale corporation

1.Huge growth potential for low end

brands. USL using franchise route to

participate in this price band and is

also exploring the possibility of

profitably exploiting this new opportunity

2.May have an adverse impact on

realization and trade terms. New system

yet to stabilize.


Regulatory Changes

Wine Project

• India’s largest winery is being built at Baramati - to be operational by October’08. Cost of the project – Rs.23 crs, over a three year period.

• Brand ZINZI to be launched next month - sourcing from a tie up winery.

• Bouvet Ladubay brands launched in Mumbai between the price points Rs1400/- and Rs 2800/-. Product launch in Delhi and Bangalore in Sept’07.

• Four Seasons range of premium brands to be launched from October’08


Withdrawal of Additional Customs Duty (ACD)

• ACD was hitherto being levied over and above the basic Customs Duty (BCD) charged on the assessable value of spirit/beer/wine imported into India and was shared with the State Governments.

• Post the withdrawal, the state governments have been allowed to levy a duty on imported Foreign Liquor (Bottled in Origin). The state governments are in the process of instituting such levies. • The new proposed levy structure would result in the following position –


Rs./Quart

BRAND E P E P E P

JW Black 3,600 4,496 1,884 1,508 2,025 1,656

JW Red 1,350 1,670 1,313 1,017 1,223 906

MUMBAI DELHI BANGALORE

E – Existing scenario with ACD P – Likely scenario post-ACD removal

Trade Marketing


• Increase focus on On-premise as compared to traditional retail

• Create a large network of Destination Outlets across the country

• Focus on interaction-led activities than awareness-led activities.

• Key account management for Premium outlets

USL – Destination outlets


USL POISED TO EXPLOIT INDIA OPPORTUNITY

Rapid induction of new consumers along with increasing urbanization will accelerate growth Early entry - 70 % prestige & 50% premium customers b/w 21 -24 yrs

USL (along-with W&M brands) has a full line portfolio that straddles all key price/value points with a pan India foot print

USL continuing to make investments in building rare and prestige portfolio and on premium premise / trade marketing capability

Working population to rise by 30% by 2013

Disposable income to increase at an average of 8.5% p.a upto 2015

Spending on non basic discretionary items and personal consumptionto grow at 9-10 % p.a

Source – Accenture Consulting

The Bulging Consuming Class


Alco-beverage Industry ImpactFastest growing segments- Premium Vodka 50%, Premium Whisky 30% , Super premium Whisky 50% , Premium Scotch 75%. 3 yrs back these segments were sluggish

Prestige segment growth at >20% compared to <10% in Regular segment

Direct entry in prestige & above categories – new phenomena

Outlook

• Third party Grain distilleries with exclusive buy back arrangement – reduces capex outlay; Option for equity participation available for better control

• Raw material price softening - However margin expansion will be around 200 bps over March’07 due to cost pressures in other materials, increased brand building activities and certain policy changes


Status update - W & M acquisition


• Post take over, Scotch prices have further hardened by 10-15%.

• Grangemouth bottling plant – Initiatives to bring in substantial savings.

• Brand contribution trajectory improving month on month.

• New markets , namely China, Taiwan, Korea & Spain being considered for tie up distribution.

• Agreement for contract bottling of JIM BEAM brands entered into post take over (> than a million cases p.a)

• Launch of W & M brands in India by the festive season.

• Branded scotch business in Europe and UK is cyclical – 2/3rd of the business accounted in the festive season – October / December.

the power of leadership presentation to analysts and investors 10 th august 2007, mumbai

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