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

HUL’s Profit Exceeds Estimates In Q3, Sales Volumes Rise 11%

Hindustan Unilever Ltd.’s third quarter net profit surpassed estimates on healthy volume growth due to a low base in the previous year on account of demonetisation.

Net profit of India’s largest fast-moving consumer goods company jumped 27.7 percent to Rs 1,326 crore on a year-on-year basis driven by higher volumes, according to the company's exchange filing. This bottom line exceeded the Bloomberg consensus estimate of Rs 1,167 crore. Sales volumes grew 11 percent as compared to a 4 percent contraction in the comparable quarter last year.

Volume growth improved as the economy and businesses recovered from the impact of a cash crunch early last year. The government’s decision to demonetise 86 percent of the nation’s currency in November 2016 had severely hit consumer demand and disrupted supply chains of businesses in the base quarter.

Revenue rose 11.5 percent to Rs 8,590 crore, also higher than the Rs 8,420 crore estimated by the Bloomberg consensus.

Earnings before interest, tax, depreciation and amortisation rose 24 percent to Rs 1,680 crore while Ebitda margin expanded by 200 basis point to 19.6 percent. The street was expecting these margins to come in at 20.1 percent.

The management remained positive on the medium term outlook for the industry despite rising input costs. “There are early signs of commodity cost inflation and we will further sharpen our focus on cost effectiveness programs and manage our business dynamically for competitiveness and sustained profitability,” Harish Manwani, chairman of HUL said in the press release accompanying the exchange filing.

HUL, which received a notice from the anti-profiteering body for failing to pass on lower tax rates on certain categories such as detergents and dishwashing soaps, said it has “proactively disclosed” an estimated value of Rs 119 crore to the CBEC on this count and offered to pay this amount suo motu to the government. “This amount is not recognised as revenue and is accounted as a liability as on 31st December 17," the company said in the release.

The Goods and Services Tax Council in Its Nov. 10 meeting had reduced the rates on these categories of products to 18 percent from 28 percent earlier. The lower rates came into effect from Nov. 15.

Key Highlights

  • Home care segment saw double-digit volume growth led by strong performance by Vim.
  • Personal care growth was led by Dove and Pears. Skin Care's growth was driven by fair & Lovely.
  • Kissan Ketchup and jams led the growth in the foods segment.
  • Tea sales grew in double digits.

Shares of Hindustan Unilever ended 0.68 percent lower at the close of the market. This is before the announcement of the results.

(The comparable year-ago revenue number used excludes excise duty)