The company’s volumes have risen 5 per cent in the third quarter compared to 1-3 per cent growth in the past few quarters.
Lower input costs and buying efficiencies buffered operating margins, which expanded 190 basis points to 19.3 per cent, even as advertising and promotional expenses rose 66 per cent. Earnings before interest, taxes, depreciation and amortization rose 16 per cent to Rs 871 crore, but near-doubling of tax expenses meant that profit after tax was just under Rs 650 crore, pushing the bottom line growth down to 5 per cent levels. Property disposals earned around Rs 50 crore.
Volume growth in the home and personal care business was offset by reduction in prices of laundry products. Soap and detergent sales, which contribute nearly half of total revenues, were down 2.4 per cent while personal care product sales (30 per cent of total revenues) grew 15.5 per cent, supported by strong performance of Dove hair care products.
HUL has lost market share in all key categories in the past decade, say analysts. Its annual sales growth has been 5.5 per cent in the period compared with 15 per cent for competitors like ITC, Marico and Nestle. However, its growth may look prettier, say analysts, given that it is coming off a low base. However, there will be an impact of high food inflation on consumer spends, and therefore sales.
The HUL stock was down 1.7 per cent to Rs 259 on Wednesday, outperforming the Sensex, which was down almost 3 per cent. The stock has revived in the past month as a defensive bet as investors worry about inflation and interest rate increase.
It has outperformed the Sensex – HUL has lost 2.4 per cent against the Sensex’s decline of 6.2 per cent. The stock trades at about 25 times its estimated FY10 earnings.