Unilever numbers boost hopes for HUL

Unilever reports 2.9% sales growth in the first quarter of 2017

Unilever, the world’s second-largest consumer goods company, beat analysts estimates on Thursday to report 2.9 per cent sales growth in the first quarter of 2017. 

Unilever follows a January-December accounting period.

The result was better than Unilever’s fourth-quarter sales growth of 2.2 per cent, led by emerging markets. Unilever derives 57 per cent of its topline from emerging markets. India is part of this group contributing 20 per cent to it. 

These markets saw sales rise 6.9 per cent in the first quarter, raising hopes that Unilever subsidiaries like Hindustan Unilever (HUL) will report good numbers for the March quarter. HUL follows an April-March accounting calendar. 

In a note on the India implications of Unilever’s first-quarter numbers, Naveen Trivedi, senior analyst, HDFC Securities, said. “This performance indicates that HUL can show better sales performance than the decline of 4 per cent in the December quarter." Most analysts expect HUL will report sales growth of 3-4 per cent in the March quarter. 

“While the rural market may see some lingering impact of the note ban, the urban market should help HUL report decent volume growth in the March quarter,” said G Chokkalingam, founder, Equinomics Research & Advisory. About 60 per cent of HUL’s sales are in urban areas. 

On Thursday, the HUL stock closed at Rs 916.10 on the Bombay Stock Exchange (BSE), up 0.78 per cent. 

Unilever’s first-quarter results have also boosted investors’ confidence that the company can go solo after rebuffing a merger proposal by US major Kraft-Heinz. Unilever had turned down a $143 billion merger bid by Kraft-Heinz in February, announcing instead a plan to boost profitability and shareholder returns. 

The plan includes combining two of its main business units, food and refreshment; divesting its spreads business; buying back shares worth 5 billion euros; raising dividends to 12 per cent; and targeting a 20 per cent operating margin by 2020, up from 16.4 per cent last year. 

Analysts expect HUL to make some announcements on the Indian roadmap of Unilever’s plan during its March quarter results.