Hindustan Unilever’s Q4 profit rises 14.2% as GST impact wears off3 min read . Updated: 15 May 2018, 02:18 AM IST
Hindustan Unilever reported a net profit of Rs1,351 crore in Q4FY18 against Rs1,183 crore a year ago
Mumbai: Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company by sales, on Monday beat analyst expectations to post a 14.2% rise in March quarter net profit. HUL reported a net profit of Rs1,351 crore in the January-March quarter, against Rs1,183 crore a year ago.
The maker of Knorr soups and Dove soaps attributed the performance to trade conditions that have normalised after the debut of goods and service tax (GST) and higher consumption. This is in contrast to the overall declining consumer confidence in the March quarter. Sales at Rs9,003 crore were up 2.5% from Rs8,773 crore a year ago. However, comparable domestic consumer sales grew by 16%, the company said in a press statement.
Comparable sales number includes excise duty, other net input taxes from reported sales of March 2017 and GST refunds to the sales of March 2018 quarter. A Bloomberg poll of 21 analysts had estimated the India unit of Anglo-Dutch consumer goods maker Unilever Plc to post a fourth quarter profit at Rs1,333 crore and revenues at Rs8,898.40 crore.
Sales growth was driven by underlying volume growth of 11%, the company said.
In the year-ago quarter as well, volume growth was 11%, but then the base for the company in the earlier December quarter had contracted by 4% due to demonetization.
Meanwhile, the RBI’s Consumer Confidence Index fell in March quarter to 95.1 points after showing some improvement in the December 2017 round where it stood at 96.9 points.
“Trade conditions have normalized and pipelines have now stabilised. We are also seeing a gradual improvement in demand," said Srinivas Phatak, chief financial officer and executive director of finance and information technology at a press conference in Mumbai.
Volume growth was broad-based and also led by rural, which is again growing ahead of urban in many parts of the country, said Sanjiv Mehta, managing director and CEO, HUL. Mehta, however, was reluctant to call it a trend and said the company would wait for a couple more quarters to see whether it’s sustainable.
Rural has grown ahead of urban even for peers like Dabur India Ltd and Godrej Consumer Products Ltd (GCPL) which announced their earnings earlier this month. For Dabur, rural demand growth at 9% outpaced urban growth at about 7%. At GCPL, rural grew at 7-8% compared to its overall domestic volume growth of 6%.
Consumer companies are optimistic of seeing consumption recovery with volume growth in double digits in 2019, a phenomenon last witnessed in fiscal 2012. Both GCPL and Dabur expect about 10-12% volume growth in fiscal 2019 from the previous year.
The quarter saw HUL step up on its advertising and promotions, spending 25% more than what it did in the year-ago quarter. “Despite a step-up in competitive intensity, we have delivered another strong performance for the quarter and the year. Growth and improvement in profitability have been sustained through a combination of winning innovations and a relentless focus on operational efficiencies," said chairman Harish Manwani, who is due to retire this year.
In the March quarter, comparable growth was driven by the home care portfolio which includes its detergents business and accounts for close to a third of its overall revenues growing 21% and personal care portfolio which accounts for nearly half of its overall revenues (13%). Its foods and beverages segments grew by 10% and 14% each respectively.
The fast-moving consumer goods sector and Hindustan Unilever already command a price-to-earnings multiple of 53.06 and 63.18 times trailing 12-month earnings each respectively, compared to the broad market’s 24.32 times.
On Monday, shares of Hindustan Unilever fell 0.09% to Rs1,504.95 on BSE while the benchmark closed flat at 35,556.71 points. HUL results were announced after market hours.