Mumbai: What will be the impact of the weak monsoon on rural demand? Is urban demand revival on track? Can urban pick-up in consumption make up for the lag in rural demand and will margins expansion sustain given the high competitive intensity? These are just some of the questions we are hoping that the country’s largest consumer packaged goods company, Hindustan Unilever Ltd (HUL), will address on Wednesday when it announces its second quarter results.

As such the earnings expectations for the consumer packaged goods sector for the September quarter is not that different from what it was in the preceding quarter—modest revenue growth is likely as volume growth continues to be challenging, while gross margin expansion is likely to continue as commodity costs in the quarter were benign.

The expectations for the maker of Knorr, Kissan, Dove and Surf is no different. The Indian unit of the Anglo Dutch Unilever Plc saw a volume growth of 6% in the preceding quarter and the expectations are that the company will record a volume growth of 6% in the September quarter as well. Volume growth is a good indicator of understanding how the demand scenario is playing out across the country.

To be sure, volume growth is aided by promotions and new launches or increased advertising spends and the September quarter had a fair share of these, especially in mature categories like soaps, detergents and shampoos. For instance, the quarter has seen the Indian arm of Cincinnati-based Procter and Gamble Co., HUL and L’Oreal India Pvt. Ltd step up in promotions and cut prices of shampoo bottles up to 30% during the quarter.

In the June quarter, the drop in prices along with falling raw material prices had affected the value growth of HUL and categories like soaps, shampoos and detergents are likely to see deflation, revenue growth this quarter too could be hurt, say analysts.

However, in spite of the higher advertising and promotion spends, the operating profit margin expansion is likely to continue. Analysts at ICICI Securities Ltd expect operating profit margin to expand 218 basis point (bps) to 18.4%, primarily driven by gross margin expansion of 550 bps led by a decline in key raw material prices. One basis point is a hundredth of a percentage point. But will this continue going forward, considering that the deflationary pressure on raw material prices is easing and with the anniversary of raw materials prices deflation setting in? It will be interesting to hear the management speak on that.

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