HUL puts demonetisation impact behind; Q4 net up 6% at Rs 1,183 cr

Q4 result: 6.2% increase in net profit compared to the corresponding quarter of the previous year

Hindustan Unilever (HUL), the country’s largest consumer goods company, lived up to the expectations of a good March-quarter result, reporting on Wednesday a 6.2 per cent increase in net profit compared to the corresponding quarter of the previous year.

The maker of Dove shampoo and Knorr soups saw its fourth-quarter net profit come in at Rs 1,183 crore, ahead of Street estimates. Bloomberg consensus estimates for the March quarter had pegged HUL’s net profit at Rs 1,085 crore, but the actual number was ahead of the estimates by nine per cent.

Fourth-quarter net sales of HUL, though, came in just below Bloomberg consensus estimates of Rs 8,114 crore. It was Rs 8,100 crore for the quarter ended March 2017, a year-on-year increase of 6.8 per cent.

Volume growth, a crucial metric tracked by most analysts and investors, came in at four per cent for the March quarter, after two consecutive quarters of decline. Price-led growth was nearly three per cent as the company undertook price hikes in soaps and detergents.

Abneesh Roy, senior vice-president, research, institutional equities, Edelweiss, admitted the four per cent volume growth reported by HUL for the quarter under review was ahead of his estimate of two per cent.

“With this, HUL has returned to the mid-single-digit volume growth trend it saw in financial years 2014-15 (FY15) and 2015-16 (FY16),” said Kaustubh Pawaskar, senior research analyst at brokerage Sharekhan.

In FY15 and FY16, HUL’s volume growth hovered largely between four and six per cent. While HUL did begin the 2016-17 financial year, reporting a four per cent volume growth in the June quarter, the company wasn’t able to sustain this in the September and December quarters as slowdown and note ban challenges took a toll on business.

Harish Manwani, chairman, HUL, said, “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. We remain optimistic about the medium-term outlook.”

HUL’s earnings before interest tax depreciation and amortisation (Ebitda) increased 12.2 per cent year-on-year to Rs 1,651 crore. Ebitda (operating) margins increased 98 basis points year-on-year as the company cut ad spends 1.4 per cent and reduced staff costs by 12 per cent over the year-on-year period.

Sales from home care and personal care saw year-on-year growth of 7.4 per cent and 8.1 per cent, respectively. 

While sales from refreshments saw double-digit growth at 10.5 per cent year-on-year, HUL said.

Sales from the packaged foods division, however, were disappointing, with just 2.4 per cent year-on-year increase, HUL said. Margins of HUL’s foods business contracted year-on-year by 370 basis points, while margins in home care, personal care and refreshments expanded 216 basis points, 19 basis points and 35bps year-on-year for the quarter under review.