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Covid-19 impact: HUL Q4 volumes decline 7%, more than in demonetisation

The Street had factored in a drop of 2-4 per cent in Q4 volume growth on account of the Covid-19 outbreak and subsequent lockdown but 7% decline was a surprise for many.

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Hindustan Unilever HUL | Coronavirus | Lockdown

Viveat Susan Pinto  |  Mumbai 

Hindustan Unilever, HUL
Sanjiv Mehta, chairman and managing director, HUL, said production had come to a near standstill in the first phase of the lockdown and the supply chain disruption was acute, contributing to the decline.

Hindustan Unilever (HUL), the country’s largest consumer goods company, on Thursday reported a 7 per cent decline in volumes for the quarter ended March 31, 2020 (Q4FY20), faring even worse than the demonetisation quarter (October-December 2016), when the fall was 4 per cent.

The Street had factored in a drop of 2-4 per cent in Q4 volume growth on account of the Covid-19 outbreak and subsequent “But a 7 per cent decline was a surprise,” said Kaustubh Pawaskar, associate vice-president (research) at brokerage Sharekhan.

“The supply disruption caused by the at the fag end of the quarter has clearly affected performance,” he said. After the note-ban period, HUL had improved its volume growth trajectory, taking it to levels of about 12 per cent in April-June 2018 before stabilising at 5 per cent in the last three quarters of FY20.

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Sanjiv Mehta, chairman and managing director, HUL, said production had come to a near standstill in the first phase of the and the supply chain disruption was acute, contributing to the decline.

Profit before tax fell 10.6 per cent to Rs 1,992 crore for the period, while net profit declined 1.2 per cent year-on-year (YoY) to Rs 1,519 crore in Q4, as against a consensus estimate of Rs 1,821 crore.

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The company’s revenue was down 9.4 per cent to Rs 9,011 crore, as against the Rs 10,103-crore consensus estimate of analysts polled by Bloomberg.

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Earnings before interest, tax, depreciation and amortisation (Ebitda) margin fell to 22.9 per cent from 23.3 per cent in the same quarter last year. Analysts expected a margin of 25.5 per cent for the period.

On Thursday, Mehta said the company had improved manufacturing capacity to about 70-75 per cent now and was looking at enhancing its digital footprint even as the company continued to engage with offline trade to improve last-mile distribution.

Mehta also maintained a positive outlook for the FMCG sector, saying the scenario would improve in the medium to long term.

"We cannot estimate the time of recovery, but we are ramping up capacity for hygiene products and more product launches in the health and hygiene space will be there from us,” Srinivas Phatak, chief financial officer, HUL, said.

First Published: Fri, May 01 2020. 02:44 IST
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