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Press Trust of India Jind
Last Updated : Jul 25 2016 | 12:57 AM IST
The June quarter numbers of consumer goods majors Hindustan Unilever (HUL) and ITC presented an interesting picture. While ITC showed some signs of recovery in its core cigarettes and other fast-moving consumer goods (FMCG) business, HUL grappled with a slowdown across most categories, barring home care.
 
The country’s largest consumer goods company, HUL, reported nearly 10 per cent growth in net profit at 
~1,174 crore, aided by a one-time gain of nearly ~71 crore. Excluding this, net profit growth was 6.1 per cent, touching 
~1,128 crore and missing Street estimates of ~1,147 crore.  
 
HUL’s June quarter revenue growth, too, missed Street estimates by a significant margin (6.2 per cent), touching ~7,988 crore, up 3.6 per cent year-on-year. Underlying volume growth came at four per cent only, the second straight quarter the company had done so.
 
Managing Director & Chief Executive Officer Sanjiv Mehta pinned down the firm's performance to a sustained market slowdown, saying the near-term outlook didn’t look too bright. Benefits of the ongoing monsoon season and implementation of the Pay Commission recommendations would show up with a lag, he felt. 
 

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The firm is expected to keep focus on its core business even more as the pressure to push growth across categories increases. Barring home care, where the premium end of detergents, fabric conditioners and surface cleaners bucked the slowdown, according to Amnish Agarwal and Saurabh Jogani of Prabhudas Lilladher. No other segment performed according to expectation.
 
ITC, on the other hand, was expecting its other FMCG business to gain steam in the coming quarters, analysts said. The company’s strategy of passing lower tax increases to consumers in cigarettes aided sales growth during the June quarter, experts noted. The Kolkata-based major reported a three to four per cent growth in cigarette sales volume for the June quarter, higher than the one to two per cent estimated by the Street. 
 
While the move aided revenue growth in cigarettes, up 6.4 per cent for the quarter, touching ~8,231 crore, earnings before interest and tax were up eight per cent to ~3,005 crore.
 
ITC's other FMCG business, which excludes cigarettes, posted a decent 9.5 per cent sales growth to ~2,385 crore. This despite management commentary of sluggish demand in the category. Pre-tax loss narrowed to ~4.52 crore from nearly ~8 crore a year ago.
 
Analysts had expected ITC to break even during the June quarter in its other FMCG business, but the management said higher brand-building and promotional expenditure ensured it could not. 
 
The expectation is the tide will turn on the pre-tax front in other FMCG for ITC in the coming quarters, as has been the trend over the past few years.

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First Published: Jul 25 2016 | 12:57 AM IST

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