Bars of Hindustan Unilever Ltd. Lux soap are displayed for sale on a shelf at a store in Mumbai. (Photographer: Kuni Takahashi/Bloomberg)

Hindustan Unilever’s March Quarter Profit Beats Estimates, Driven By Sales Volume

Pent-up demand during demonetisation helped boost volumes for Hindustan Unilever Ltd. in the three months ended March, pushing up sales of personal and home care products for India’s largest consumer goods maker.

Net profit rose 6.2 percent to Rs 1,183 crore over the year-ago quarter, according to the company’s exchange filing, making it the fifth consecutive quarter of growth. Analysts tracked by Bloomberg had expected a flat or marginally lower profit.

Volumes grew 4 percent for the maker of Lux soaps and Lipton tea and revenue rose 6.7 percent to Rs 8,886 crore as sales of products like soaps, shampoos, creams and detergents rose during the quarter. Revenue from personal care had fallen while home care sales were flat in the previous quarter after Prime Minister Narendra Modi invalidated old high-value currency notes. The segments contribute more than 85 percent to the company’s revenue.

Earnings before interest, tax, amortisation and depreciation rose 12.2 percent to Rs 1,651 crore, while profitability margins expanded to 20.1 percent from 19.1 percent, as per BloombergQuint’s calculations.

HUL expects commodity costs to stabalise and help drive volume growth and margins. The fast moving consumer goods company’s raw material costs increased 9.6 percent in the fourth quarter.

This has been a strong quarter with profitable, volume-driven growth. In a challenging year, we delivered a resilient performance by managing our business dynamically and responding with agility to the changing external environment.
Harish Manwani, Chairman, Hindustan Unilever

Challenges

Rural growth remains low compared to demand from urban areas, Manwani said.

While the implementation of the Goods and Services Tax will help in the long turn, it could pose short-term challenges, especially for the wholesale channel, PB Balaji, chief financial officer of HUL, said.

FMCG companies fear bulk dealers may cut stock ahead of the GST rollout as tax rates may change under new indirect tax regime.

The wholesale channel continues to remain under pressure post demonetisation and HUL is planning to increase its direct reach.

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