After riding a crest for much of 2011-12, consumer goods company Hindustan Unilever (HUL) now appears to be struggling, thanks to lower consumer spending, mainly in discretionary categories. Also, the company has signed a new agreement with parent Unilever Plc under which its royalty payment would rise to 3.15 per cent of sales by March 2018 from 1.4 per cent now.
HUL’s volume growth was down to five per cent in the quarter ended December 2012, from 9-10 per cent in the year-ago period. The rise of 16 per cent in net profit to Rs 871 crore was also lower than the Street estimates.
The company’s stock sank six per cent late afternoon on BSE on Tuesday before recuperating a little to end the day 2.9 per cent lower at Rs 481.55 a share.
| SIGNS OF A SLOWDOWN Consolidated figures (Rs crore) | |||||
| Year end | Sales | Royalty | Net profit | Dividend | Royalty** |
| 2007-08 | 13,829.25 | 0.00 | 1,918.87 | 1,976.12 | 0.00 |
| 2008-09* | 20,457.95 | 0.00 | 2,509.94 | 1,634.51 | 0.00 |
| 2009-10 | 17,737.57 | 157.79 | 2,164.61 | 1,417.94 | 0.89 |
| 2010-11 | 20,022.55 | 268.89 | 2,306.63 | 1,410.60 | 1.34 |
| 2011-12 | 23,436.33 | 307.24 | 2,800.14 | 1,620.94 | 1.31 |
| *For 15 months; **Royalty as % of net sales Data source: Capitaline; Compiled by BS Research Bureau | |||||
The FMCG major’s net sales rose 12 per cent during the quarter to Rs 6,655 crore. Analysts were expecting HUL to post an average net profit of Rs 900 crore on sales of around Rs 6,800 crore. “HUL has delivered a disappointing set of numbers, with the five per cent underlying volume growth for domestic consumer business the lowest in last three years,” said Angel Broking research analyst (FMCG)
V Srinivasan. “While the low-margin soaps and detergent division posted a 20 per cent sales growth, the personal products division disappointed with a modest 13 per cent sales growth. We maintain a neutral view on the stock,” he said.
HUL Chief Financial Officer R Sridhar, addressing the media at the company’s headquarters in Mumbai, said challenges in the near term would likely persist, especially in categories such as face care, hair care, ice-creams and packaged foods.