May 13, 2020 / 7:16 AM / 20 days ago

UPDATE 1-Stock Spirits' first-half earnings spike on stockpiling, off-trade sales

(Adds CEO comments, details on results and background)

May 13 (Reuters) - Stock Spirits on Wednesday posted a 25.6% jump in first-half earnings as consumers stocked up on liquor ahead of tax hikes in its biggest markets, Poland and Czech Republic, while retail off-trade sales during the COVID-19 lockdown also helped.

Stock Spirits, manufacturer of 1906, Stock Prestige and Vodka No.1, said its shift to off-trade channels helped to mitigate any impact from the widespread closure of bars, clubs, restaurants and hotels put in place to tackle the pandemic.

Nearly 85% of the group’s revenue came in through the retail off-trade channel, the company said.

Adjusted earnings before interests tax depreciation and amortization (EBITDA) came in at 44.2 million euros ($47.96 million) for the six months ended March 31, compared with 35.3 million euros last year.

“The COVID-19 pandemic reached our markets towards the end of the period, and as a result of our long-standing focus on the off-trade, our broad portfolio of local brands, and our strategy of sourcing and manufacturing our products locally, it has had a minimal impact on our operations to date,” Chief Executive Officer Mirek Stachowicz said.

The pandemic, which has caused sizeable damage to the world economy, is however expected to impact all major liquor makers’ profit if production facilities, bars and restaurants are kept closed for any longer.

Last April, the Czech Finance Ministry put forward a 13% tax hike on spirits and gambling, while Poland proposed higher taxes on alcohol. Both countries eventually implemented the tax hike earlier this year.

“Our businesses in both markets experienced exceptionally strong demand from our customers as they built up inventory in the run up to these changes (tax hike) being implemented,” the company had said in February.

The London-listed firm also took a charge of 14.2 million euros ($15.41 million) on its minority investment in Quintessential Brands Ireland Whiskey, as COVID-19 hit the demand for its relatively less established and higher-priced products.

($1 = 0.9217 euros)

Reporting by Shanima A in Bengaluru, Editing by Sherry Jacob-Phillips

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