The Board of Directors of the Zwack Unicum Plc. has approved the Management's report about the results of the Company in the first half of the 2019-2020 business year. The data have not been audited.
Total gross sales of the Company were HUF 12 223 million, a year-on-year increase of 0.6%. Net sales (sales revenues excluding excise tax and public health product tax [NETA]) were HUF 6 467 million, a year-on-year decrease of 12% (by HUF 881 million).
There was a considerable decrease in the net domestic sales (–HUF 959 million; –14.6%). The net sales of own produced goods decreased in the domestic market by HUF 841 million (by 16.2%) (HUF 4 340 million instead of HUF 5 181). Broken down, sales of premium products decreased by 16% and those of quality products by 16.8%.
The amendment of the Act on Public Health Product Tax (NETA), effective as of January 2019, was the cause of the considerable difference between the gross and net sales. In the wake of the amendment each and every type of alcoholic drinks has been taxed (as from 2019, pálinkas and bitter liqueurs also), and the tax categories have been raised by 20%. The Company has shifted the massive tax hike into its gross prices but – just as we had predicted – that has radically reduced the volume sold. As a consequence of those contrasting processes, the gross domestic sales have levelled off. As proportionally the combined excise tax and Public Health Product Tax levied on the smaller volume was higher than a year before (+HUF 959 million; +20%), the net sales took a steep dive.
The net sales revenue of traded products had a year-on-year decrease of 8.4%. Broken down, the revenue of the Diageo portfolio went up by 8.7%, while the revenue of the other traded products decreased by 43.4%. That the Zwack Unicum Plc. has not been the official distributor of the Moët-Hennessy products since 1 March 2019 explains the latter decrease; excluding this effect revenues of the other traded products went up by 12.1%.
Market research data for the April–September period in off-trade indicate that the Hungarian taxed spirits markets had a year-on-year increase in volume by 2.2% and in value by 12.2%.
Export earnings were HUF 843 million – a year-on-year increase of 10.2% (+HUF 78 million). The brunt of increase was derived from sales in the Company’s two major export markets: Italy and Germany, however revenues from the duty-free sector have decreased (the NETA tax has also affected sales in Budapest’s international airport).
The material-type expenses decreased by HUF 243 million (–9.6%). As that figure is lower than the decrease of net sales – the latter being –12% – the gross margin ratio has a year-on-year decrease of 1 percentage point (64.5% instead of 65.5%). An unfavourable change in the product mix is the main factor behind that change (the sales of own-produced high-margin goods decreased faster than those of traded products).
Employee benefit expense increased by HUF 8 million (0.6%). Bearing changes in the labour market in mind, the Company granted a wage and salary increase of between 5 and 10% by differentiating it for the various payment levels. In lower payment categories the hike was a higher percentage while in higher ones it was lower. That the employee benefit expense increase was lower than the wage and salary increase was due to several factors: the headcount was lower than in the previous business year, the social contribution tax was lowered as of July 2019 and, during the previous business year, several one-off expense items were posted.
The other operating expenses decreased by HUF 42 million (2.2%) – due mainly to spending less for advisory services. The marketing expenses were practically unchanged. In compliance with the original plans, the domestic marketing expenses were cut back, while our investments grew in the export markets. That was because in Italy Unicum’s television campaign was held in August and September while in the previous business year it took place during the Christmas season. In the third quarter of this business year that spike in marketing expense will not reoccur.
The profit from operations was HUF 849 million – a year-on-year decrease of 38.6%. The taxes levied on the operating income decreased by 24.9% (that is to say, by HUF 63 million). The income tax expense includes also the local business tax and the innovation contribution – – whose basis is the gross profit. . Due to the different bases of taxation, the income tax expense only decreased by 24.9% while the profit before taxation decreased by 38.5%.
The Company’s profit after taxation was HUF 660 million – a year-on-year decrease of 41.5% (previous: HUF 1 129 million).
Accounts details can be read here.