HUL sees strong growth in profit margins in Q3

Hindustan Unilever, the country’s largest fast-moving consumer goods maker, reported a 17% increase in its like-to-like top line and an 11% growth in sales volumes for the October December period when compared to the previous year.

The previous year’s sales were disrupted by demonetization.

The total revenue, including tax, generated by the company rose to 8,323 cr in the third quarter from Rs 8,124 cr in the year-ago quarter. However, the numbers are not directly comparable due to the change in tax accounting this year.

Due to cost cutting and robust revenue growth, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose 24% on year Rs 1680 cr.

In this regard, total operating expenses, including depreciation, fell to 7,036 cr from 7,067 cr in the previous year. However, on a sequential basis, there was an increase of Rs 288 cr in total expenses on account of higher material costs, employee expenses and advertising costs.

On a year-on-year basis, profit before interest and tax jumped to 1,706 cr from 1,333 cr. Nevertheless, on a sequential basis, this was lower by Rs 59 cr.

The company said the expansion of EBITDA (operating profit) margin up by 110 bps year-on-year was due to lower cost of goods sold, which was due to “a strong savings program”.

Advertising and Promotion spends were stepped up to support innovations and market development activities, it said.

Net profit jumped to Rs 1,326 cr for Oct-Dec from Rs 1,038 cr in the year-ago period and Rs 1,276 cr in the preceding quarter.

“Our Comparable (adjusted for GST) Domestic Consumer Growth was 17% and Underlying Volume growth was 11%,” HUL said.

The Home Care segment saw double-digit volume growth across categories. Within this, laundry saw robust double-digit growth across key brands, it said.

Growth in Household Care was led by a strong performance in Vim. The Purifiers business saw the launch of air purifiers under the Pureit brand.

In the Personal Care division, there was broad-based growth across Personal Products and Personal Wash Personal wash witnessed robust growth across key brands led by Dove and Pears, HUL said.

“Growth in Skin Care was driven by the strong performance of Fair & Lovely. Hair Care witnessed broad based volume led growth. Indulekha brand has now been extended to include Indulekha Bringha shampoo, an ‘Ayurvedic Medicine for Hairfall,” it said.

Colour cosmetics delivered yet another quarter of strong growth.

The Foods segment saw strong growth led by Kissan.

“Kissan delivered broad based growth across Ketchups & Jams. Knorr growth was led by a strong performance in Soups.”

The Refreshments division reported sustained robust performance, HUL said.

“Tea continues to deliver double-digit growth. Coffee witnessed a strong performance and the growth momentum continued in Ice Cream and Frozen Desserts.”

The company said that many of its products benefited from the reduction of GST rates from Nov 15.

“While the implementation of this change was initiated immediately, it was not possible to pass on the entire benefit of this rate reduction on some of the pipeline stocks during the transition,” it said.

It said it disclosed a value of Rs 119 cr to the Central Board of Excise and Customs and offer to pay this amount suo motu to the Government.

“This amount is not recognised as revenue and is accounted as a liability as on 31st December 17,” it said.

“We have delivered another strong performance in the quarter, with broad based growth across categories and further improvement in margins,” said Harish Manwani, Chairman of the company.

“We remain positive about the mid-term outlook of the industry and will continue to invest strongly in our core brands and developing categories of the future. There are early signs of commodity cost inflation and we will further sharpen our focus on cost effectiveness programs and manage our business dynamically for competitiveness and sustained profitability.”