HUL posts robust numbers on one-time gain, higher sales

Aided by an exceptional gain of Rs 179.4 crore from the sale of properties, the net profit of the country's largest consumer goods company, Hindustan Unilever (HUL), rose 16.7 per cent year-on-year for the quarter ended March to Rs 1,018 crore. It was Rs 872 crore in the year-ago period.

Net sales grew 9 per cent to Rs 7,555 crore during the quarter, as volume growth picked up for the period under review. Volume growth was 6 per cent for HUL during the fourth quarter, the highest for the company in FY15. In the last three quarters, HUL's volume growth hovered between 3 per cent and 5 per cent as the company battled a consumer slowdown.

HUL's MD Sanjiv Mehta said rural growth was ahead of urban growth for the company, in line with the sector. "If you look at a one-year period, urban growth for the FMCG market has been 4 per cent, while rural growth has been 8 per cent," he said, without elaborating whether this trend would stay.

In the fourth quarter, raw material costs were flat, giving HUL headroom to bring down prices of products.

HUL's CFO P B Balaji said the company took a 5-6 per cent price drop in soaps and detergents and skin cleansing during the quarter, aiding overall volume growth. For the quarter, personal products sales grew 13 per cent, second only to packaged foods, which saw the sixth consecutive quarter of double-digit growth. Beverages saw 11 per cent growth and soaps & detergents 5 per cent, respectively.

While HUL's overall volume growth was in line with Street estimates and net sales slightly below estimates, net profit beat Bloomberg's consensus estimates. Street estimates, according to Bloomberg, had pegged net sales at Rs 7,648 crore and net profit at Rs 960 crore, respectively.

"HUL's Q4 FY15 revenues were in line with estimates, while the Ebitda marginally missed our estimates, on lower gross margins. At the segment level, revenue and profit growth in soaps and detergents came in relatively lower than our expectations, while growth in personal care has outperformed expectations," Ritwik Rai, analyst at Kotak Securities, said. "We see sustenance of industry-beating growth, robust volume growth overall and double-digit growth in personal products as the key positives of the results. The company has managed robust Ebitda growth, even as it has passed on raw material benefits to consumers, and has raised advertising and promotion spends aggressively," he added.

HUL's advertising and promotion expenditure grew 22.3 per cent during the quarter to Rs 1,027 crore as the company used the headroom given by lower commodity prices to its advantage. Besides price drops, aggressive advertising also helped HUL push sales volumes as it endeavoured to stay on top of consumer minds, both in urban and rural markets.

HUL's operating profit, interestingly, climbed 22.3 percent year-on-year to Rs 1,318 crore and margin expanded by 200 basis points to 17.2 per cent despite higher advertising expenses. Analysts had estimated operating profit growth of 18.1 per cent and margin expansion of 140 basis points for the quarter.

The HUL stock rallied nearly 5 per cent on the BSE after the announcement of results on Friday afternoon. It closed 3.34 per cent up, at Rs 894.60.