Consistent Performance Blended with Spirited Endeavours Q2 FY2016 Earnings Presentation November 9, 2015
Important Notice This presentation contains statements that contain “forward looking statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Radico Khaitan’s future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Radico Khaitan undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances. www.radicokhaitan.com 2
Financial Highlights Q2 FY2016 vs. Q2 FY2015 H1 FY2016 vs. H1 FY2015 o Net Sales of Rs. 432.5 Crore o Net Sales of Rs. 892.2 Crore o Prestige & Above brands volume growth at 8.5% o Prestige & Above brands volume growth at 8.6% o Prestige & Above brands contribution to the total o Prestige & Above brands contribution to the total IMFL volumes increased from 21.2% to 24.7% IMFL volumes increased from 21.0% to 25.0% o Operational EBITDA of Rs. 53.7 Crore up 13.1% o Operational EBITDA of Rs. 104.9 Crore up 7.4% o Operational EBITDA margin improved 216 bps to o Operational EBITDA margin improved 126 bps to 12.4% 11.8% o Operational Net Income of Rs. 22.2 Crore up 13.6% o Operational Net Income of Rs. 44.3 Crore up 16.9% o Net debt of Rs. 802.5 Crore; repayment of Rs. 44.2 Crore during the first half of the year Strong free cash flow generation; Continued reduction in Net Debt www.radicokhaitan.com 3
Management Perspectives Commenting on the results and performance, Dr. Lalit Khaitan, Chairman and Managing Director said: “Radico Khaitan reported another quarter with consistent and profitable growth driven by our focused approach. Strong cash flow generation and profitable growth led by premium volumes remains the core of our strategy in the medium term. We are very optimistic about the future as we see our strategy start to deliver expected results. Management is confident that we have an established platform and the right strategy that will take Radico Khaitan to the next orbit of growth in the years to come. ” Commenting on the results and performance, Mr. Abhishek Khaitan, Managing Director said: “Our Q2 FY2016 top-line performance is a reflection of the current industry trend. However, our Prestige & Above brands continued their robust performance with 8.5% y-o-y volume growth. Despite a decline in revenues, we reported operational EBITDA growth of over 13% with a 216 bps margin improvement. We also continued to generate strong free cash flow and reduce debt. The performance of our premium brands such as Magic Moments and Morpheus remains robust, our newly launched RTD product Electra made an impressive start, and our overall profitability continues to improve. We have all the building blocks in place to deliver a much stronger performance and return to shareholders in the coming quarters. ” www.radicokhaitan.com 4
Economic Environment Input costs experienced a stabilising trend; Anticipated price increases across states to offset subdued volumes As per the latest release by the India Sugar Mills Association (ISMA), the overall sugarcane acreage in the o 2015-16 sugar season is estimated to be 5.28 million hectares, a marginal decline of 0.4% compared with the last year. Sugar production based on preliminary estimates is expected to be around 27.0 million tonnes in 2015-16 In the current sugar season 2014-15, sugar mills are estimated to have produced 28.8 million tonnes of sugar. o Given the consumption estimates of 25.2 million tonnes, the next sugar season is expected to start with a significant balance of 9.6 million tonnes Overall, raw material prices, in particular ENA and glass bottle, have remained stable during Q2 FY2016 and o are expected to remain at these levels in the near term www.radicokhaitan.com 5
Financial Overview Q2 and Half Year FY2016 Financial Performance Q2 y-o-y Half Year y-o-y (Rs. Crore) FY2016 FY2015 Growth (%) FY2016 FY2015 Growth (%) Gross Sales 1,075.4 1,100.6 (2.3)% 2,252.7 2,245.6 0.3% Net Sales 432.5 463.2 (6.6)% 892.2 930.2 (4.1)% 53.7 47.5 13.1% 104.9 97.7 7.4% Operational EBITDA 12.4% 10.3% 11.8% 10.5% Operational EBITDA Margin (%) Net Income 18.6 14.9 25.0% 36.7 31.5 16.8% Operational Net Income 22.2 19.5 13.6% 44.3 37.9 16.9% Operational Basic EPS (Rs.) 1.67 1.47 13.6% 3.33 2.85 16.9% Net Sales: Includes sale from tie-up units net of royalty income Operational Net Income: Net Income has been adjusted for foreign exchange fluctuation loss / (gain) of Rs. 3.6 Crore in Q2 FY2016 compared with Rs. 4.6 Crore in Q2 FY2015 and Rs. 7.6 Crore in H1 FY2016 compared with Rs. 6.5 Crore in H1 FY2015. This is as per para 46A of Accounting Standard 11. This foreign exchange fluctuation loss is related to ECBs and is a non cash item in the Other Expenditure of the statutory financial statements www.radicokhaitan.com 6
Operational Performance Higher margin Prestige & Above category continues to be a key contributor and driver of future growth Prestige & Above as 21.2% 24.7% 21.0% 25.0% % of Total Volume 99.79 90.95 46.24 78.87 68.23 42.90 36.46 32.29 22.72 20.92 10.61 9.78 Q2 FY15 Q2 FY16 H1 FY15 H1 FY16 Prestige & Above (lakh cases) Regular & Others (lakh cases) Radico Khaitan strategically defocused the sale of low margin category brands in the state of Tamil Nadu. This resulted in a decline of volumes in Tamil Nadu from 3.47 lakh cases in Q2 FY2015 to just 4,000 cases in Q2 FY2016. Excluding this impact, the Company’s overall volumes would have remained flat (+0.2%) compared to a decline of 7.2%. www.radicokhaitan.com 7
Performance Discussion Q2 FY2016 Highlights Net Sales: Net Sales declined by (6.6)% compared to the same period last year. Total IMFL volume declined by (7.2)% primarily due to the strategic defocus on the low margin category brands in Tamil Nadu. However, the Prestige & Above brands volume increased by 8.5%. As a percentage of total IMFL volumes, these brands now contribute 24.7% compared to 21.2% last year. Gross Margin: Gross margin during the quarter improved from 42.8% to 44.5% on a y-o-y basis. This 166 bps improvement was due to a combination of stabilising raw material prices and increased share of Prestige & Above category brands. EBITDA: Operational EBITDA increased by 13.1% and margins expanded by 216 basis points to 12.4% compared to the same period last year. This was primarily due to improved Gross Margin. Balance Sheet: As of September 30, 2015, Total Debt was Rs. 820.3 Crore, Cash & Cash Equivalents were Rs. 17.7 Crore resulting in Net Debt of Rs. 802.5 Crore (vs. Rs. 838.9 Crore as of March 31, 2015). Total Debt consists of Rs. 425.1 Crore of Working Capital loans and Rs. 395.2 Crore of Long Term loans, including Long Term loans maturing within 12 months of the balance sheet date. Total Debt also includes a non-cash impact of Rs. 15.3 Crore on foreign currency loans due to depreciation of the Indian Rupee during the first half of the year. During the first half of FY2016, the Company reduced debt to the extent of Rs. 44.2 Crore. This includes the above non- cash impact of Rs. 15.3 Crore. www.radicokhaitan.com 8
New Product Launch Magic Moment ELECTRA – a premium ready-to-drink (RTD) product ELECTRA has been positioned to capture the significant • market opportunity in the RTD segment Launched in three unique flavours after extensive • research: o Cosmopolitan: Cranberry Base with the hint of lime o Appletini: Apple Flavour o Agent Orange: Orange base with carrot as a combination ELECTRA is triple distilled and triple filtered with • carbon/ silver/ platinum Available in a premium packaging and a ring pull cap • (first time ever introduced in a RTD product in India) Appletini Within a few months of the launch in the North and • North Eastern states of India, ELECTRA has gained significant traction; received positive feedback from the Cosmopolitan Agent Orange consumers and trade channels www.radicokhaitan.com 9
New Product Launch Magic Moment ELECTRA – marketing campaign www.radicokhaitan.com 10
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