Home / Companies / HUL net beats expectations on volumes, cost cutting

Mumbai: Hindustan Unilever Ltd (HUL), the Indian unit of Anglo-Dutch consumer goods maker Unilever Plc, beat market forecasts with a 21% jump in fourth quarter profit on the back of higher volumes, a strong cost-cutting drive and buying efficiencies in an inflationary environment.

Domestic consumer product sales, which include home and personal care and foods, grew 20% to 5,494.6 crore from 4,565.3 crore, driven by increased rural penetration, innovations and launches, apart from price hikes.

“This (growth) is driven by 10% of underlying volume growth and an equal price growth," said R. Sridhar, chief financial officer.

The net profit numbers are not strictly comparable as the fast-moving consumer goods (FMCG) exports division was separated and transferred to wholly owned subsidiary Unilever India Exports Ltd, effective 1 January.

Report card: Chief executive officer Nitin Paranjpe. HUL’s net profit rose to Rs 686.61 crore for the March quarter from Rs 569.18 crore a year ago. (Saanskrut Kumar/Mint)

“The results are exceptionally good. There are no two ways about it," said Manoj Menon, an equity research analyst (consumer discretionary and staples) at Kotak Institutional Equities. “But as the quantum of price growth increases, we will have to watch what impact it will have on demand in the coming quarters."

Revenue from selling soaps and detergents, which accounts for close to 45% of the total, rose 29% to 2,830 crore, largely because of price increases. Personal care product sales were driven completely by volume growth at 17% to 1,710 crore.

The foods and beverage business crossed the 1,000 crore revenue mark for the first time during the quarter, although growth was tepid at 7.74%.

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With fourth quarter results out, Harish Manwani of HUL, talks about the company’s quarterly performance and whether inflation has impacted growth

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“The two key channels that are driving our growth are modern trade and rural. Modern trade in terms of expansion of stores, with most companies adding stores. And rural largely on the back of expansion of coverage that we added in the last two years. These are growing significantly faster than urban," said Nitin Paranjpe, chief executive officer.

For the last eight quarters, the company has had volume growth of 9-12%, thanks to innovations and the tripling of rural reach over the last two years. “Innovations have touched 60-65% of our business by way of relaunches, new packs," Paranjpe said.

Harish Manwani, chief operating officer at Unilever, said, “In India, we may not be growing the way we were in terms of the GDP (gross domestic product) growth, but the fact is that it is still good growth and the fact is that in our sector the demand is still robust." He was speaking in the context of growth slowing from its highs in emerging markets such as China, South-East Asia and Latin America.

Price increases and savings through cost-efficiency programmes saw HUL’s operating profit margin (OPM), a measure of operating efficiency, widen to 12.86% from 11.6%.

Peers Godrej Consumer Products Ltd and Nestlé India Ltd also saw OPM gains—of 1.39 and 0.8 percentage points, respectively.

However, as the prices of commodities such as palm oil and crude stayed high, Dabur India Ltd and Procter and Gamble Hygiene and Healthcare Ltd saw OPMs narrow by 4.96 and 2.28 percentage points, respectively.

For the full year, HUL grew ahead of the market’s 14% sales expansion, with a 17.5% rise in the domestic consumer business. “Of this, 8-9% was volume growth and the balance from prices," said Sridhar. OPM expanded by 140 basis points for the full year.

A basis point is one-hundredth of a percentage point.

HUL dropped 0.11% to close at 416.35 on Monday on BSE. The market was closed for a holiday on Tuesday. The benchmark Sensex had gained 0.76% to close at 17,318.81 points, and the BSE FMCG index had lost 0.27% to end at 4,772.07 points.


Also Read |HUL keeps focus on volume growth

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