GST Hits HUL’s April-June Volume Growth
HUL reports in line earnings on almost all parameters.
India’s largest consumer goods maker Hindustan Unilever Ltd. reported a flat volume growth in the April-June quarter as distributors cut stock ahead of the Goods and Services Tax rollout. HUL’s earnings were in line with estimates on almost all other parameters.
Despite increased advertisment expenditure, stock pipelines remained low, the management said in its exchange notification. “During the quarter, trade sentiment remained cautious, particularly in the run up to GST implementation,” the notification added.
The destocking particularly affected the personal care and foods segment, the company’s Chief Financial Officer PB Balaji said at the media briefing.
Standalone revenue rose around 5 percent to Rs 9,222 crore on a year-on-year basis, according to the company’s filings. Net profit rose 9.3 percent to Rs 1,283 crore in the same period. Profit beat the Bloomberg consensus estimate while revenue was in line.
Earnings before interest, tax, depreciation and amortisation were seen up by 11 percent at Rs 1,866 crore while EBITDA margins expanded to 21.9 percent compared to 20.6 percent from the same period last year.
“We remain positive on the medium term outlook for the industry,” Chairman Harish Manwani said in the exchange filing. “Both growth and margin improvement were delivered through a combination of sustained innovations, a comprehensive savings program and a relentless focus on execution in the market place.”
Even the zero percent volume growth was a “good achievement” for the company in this quarter, Abneesh Roy, equities research analyst - institutional at Edelweiss Securities told BloombergQuint over the phone. He expects retailers to restock in the second quarter after the transition to GST is out of the way. The brokerage raised its target price on HUL to Rs 1,253 from Rs 1,106 per share earlier while maintaining its ‘hold’ recommendation.
No Price Hikes In Near Future
The FMCG giant will not take any price hikes in detergent and shampoos for the next two to three months, Balaji said at the press briefing.
The company did not increase the prices of detergents in the run up to GST, despite a higher tax rate under the new regime. It reduced the prices in soaps in order to pass on the benefits of a lower tax rate.
Segmental Revenue
- Home care segment grew 5.9 percent.
- Personal care segment grew 3.5 percent.
- Food segment grew 4.4 percent.
- Refreshment segment grew 10.8 percent.
- Revenue from other products such as exports, skin and feminine care fell 17.6 percent.