HUL net down 2%, records new high in volume growth at 13%

Lower gains pulled down the net profit of Hindustan Unilever (HUL) by two per cent to Rs 569 crore for the quarter ended March 31, against Rs 581 crore reported last year.

However, net sales was up 13.5 per cent for the quarter to Rs 4,899 crore from Rs 4,315 crore reported last year. Of this, the domestic consumer business, which makes up the bulk of its turnover, grew almost 14 per cent to Rs 4,565 crore from Rs 4,005 crore reported last year.

The growth was led entirely by volumes in keeping with the trend over the last few quarters. For the December quarter, for instance, HUL’s volume growth was 13 per cent, while in September it was 14 per cent and for the June and March quarters, it recorded 11 per cent.

“While the volume growth in the December, September and June quarters of this year came on the back of a low single-digit base in the corresponding period last year, this quarter was exemplary because the base in the corresponding period was high at 11 per cent,” said Anand Mour, senior FMCG analyst at Mumbai-based brokerage Indiabulls.

HUL’s full-year volume growth was also good at 13 per cent — its highest in over a decade. This was reported on net sales of Rs 19,401 crore — a growth of almost 11 per cent over the year-ago period. Price-led growth was a negative two per cent, which indicated that HUL was not passing input cost pressures enough to consumers.

Net profit for the year stood at Rs 2,305 crore — growth of almost five per cent over the year-ago period.

HUL predictably saw its margins erode as a result of its focus on volumes, with operating margins down by 190 basis points for the year and 233 basis points for the quarter. Cost of goods sold during the quarter and the year were higher by 290 basis points and 120 basis points respectively.

This was clearly because of inflationary pressures especially in soaps and detergents, said HUL’s Chief Executive Officer Nitin Paranjpe.

What also added to the margin pressure was advertising and sales promotion expenditure, which remained in double-digits at 12.7 per cent for the quarter and 14.2 per cent for the year.

“We  continue to invest in brand-building activities,” said Paranjpe. While declining to give any guidance for the forthcoming quarters, he said he expected some moderation in volume growth for the industry.

Meanwhile, HUL on Monday announced that its board of directors had approved a proposal to demerge its FMCG exports business into its wholly owned subsidiary Unilever India Exports Limited with effect from April 1.

The move would help the company to focus on the business better, Paranjpe said. "Under a subsidiary, it will get the attention it deserves," he said.

HUL’s exports division for the quarter and the year ending March 31, had a turnover of Rs 278 crore and Rs 1,093 crore respectively.

The firm exports Pears soap, Fair & Lovely and tea & coffee to the Middle East, the UK, the US and Africa, where the Indian diaspora is located.

The plan was to expand the basket of products. The stock of HUL was up 3.55 per cent on Monday on the Bombay Stock Exchange (BSE) to Rs 284.45. It began the day at Rs 275, hitting a high of Rs 288 and a low of Rs 270 per share.