Mumbai: Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company, posted an 18% increase in net profit for the quarter ended June, beating estimates.
The maker of Surf detergents and Lux soaps made a profit of Rs627 crore compared with Rs533 crore in the year earlier, it said on Thursday.
The earnings estimate of 18 analysts compiled by Bloomberg had pegged net profit for the quarter at Rs590 crore.
Earnings were bolstered by a one-time gain of Rs58 crore on account of property sales. In the corresponding period last year, it had a one-time gain of Rs18 crore.
The Indian subsidiary of Unilever Plc also beat analysts expectations on revenue, which rose 15% to Rs5,504 crore from Rs4,794 crore. A Mint poll of seven brokerages estimated revenue to increase between 10% and 14.7%.
HUL lost 0.98% to close at Rs322.7 on Thursday on the Bombay Stock Exchange. The bourse’s benchmark Sensex lost 1.21% even as the FMCG index gained 0.95%. Since April, HUL has gained 13.39%, outperforming both the FMCG index that rose 12.99% and Sensex that lost 6.35%.
During the quarter, domestic consumer business was driven by strong 8.3% underlying volume growth. The price-driven growth was over 6%.
“Our volume growth has slowed down but is ahead of the market rate,” said R. Sridhar, chief financial officer.
Among business categories, home and personal care grew 15.4%; personal products grew 19.4%, and foods grew 14.9% with strong performance in both beverages and packagedfoods. Beverages grew by 13.1% with tea and coffee performing well.
For the company, this is the fourth consecutive quarter of double-digit growth, led by a combination of innovations, market development and focus on execution. “In a challenging business environment, we are managing our business dynamically to ensure that we remain competitive and cost-efficient,” Harish Manwani, HUL chairman, said in a release.
During the quarter, HUL reduced its net advertising spend to Rs633 crore from Rs751 crore a year ago. While the spend on detergents declined in line with the industry trend, that on packaged foods and personal products rose.
On account of the high commodity prices, the company has adopted a weekly review system. Every Monday, HUL teams meet to discuss sensitive categories and take suitable action, such as price increases. Commodity inflation saw the cost of goods sold going up by 480 basis points (bps). One basis point is one-hundredth of a percentage point.
Despite price increases and cost savings, the quarter saw operating profit margin shrink by 45 bps. Rivals Marico Ltd, Godrej Consumer Products Ltd and Colgate-Palmolive India Ltd saw sharper declines in their operating profit margins.
“We expect input costs and competitive intensity to remain high,” Sridhar said.
As gross margins are still under pressure, analysts expect September quarter revenue to be driven by price hikes.
“I expect price rises to be in excess of 8% and volumes to be slightly lower at about 7% or 8%,” said Anand Mour, vice-president, Indiabulls Securities Ltd.