HUL Q3 net profit rises 8.9% to Rs 1,444 crore; volume growth at 10%

The country’s largest consumer goods company, Hindustan Unilever (HUL), on Thursday delivered its fifth straight quarter of double-digit volume growth for the three months ended December 2018 at 10 per cent, as the firm reined in price hikes amid a challenging macro-economic environment.


Analysts had factored in volume growth of 8-10 per cent for the quarter under review, implying the figure was in line with Street estimates. However, net profit growth was the slowest in over a year at 8.9 per cent to Rs 1,444 crore, as the company had a higher tax outgo of Rs 510 crore for the quarter versus Rs 297 crore in the year-ago period. This figure is adjusted for an exceptional item of Rs 62 crore towards restructuring expenses and acquisition and disposal-related costs, the company said.


The Street, though, expected net profit to fall in this region as Bloomberg consensus estimates pegged net profit at Rs 1,455 crore for the period under review.


HUL Chief Financial Officer Srinivas Pathak said, before tax and exceptional items, profit growth stood at Rs 2,012 crore, growth of 17.93 per cent over the year-ago period.


Year-on-year net sales growth for the quarter was 12.42 per cent, coming in at Rs 9,357 crore as the company gained from the volume uptick seen during the period. Growth in revenue (which is net sales plus other operating revenue) was 11.3 per cent to Rs 9,558 crore. This again was in line with Street estimates, which stood at Rs 9,447 crore for the period.


The operating income, or earnings before interest, tax, depreciation and amortisation (Ebitda), increased 21.8 per cent year-on-year to Rs 2,046 crore. The consensus estimate was Rs 2,006 crore. HUL’s operating margin expanded to 21.9 per cent from 20.2 per cent a year ago, growth of 170 basis points as the company saw savings in ad spends and other expenditure, Abneesh Roy, senior vice-president (research), institutional equities, Edelweiss, said. “We continue to believe volume growth will remain strong on the back of election related sops, record NREGS spends by the government as well as company-led initiatives,” Roy said.


This point was endorsed by Kaustubh Pawaskar, research analyst at brokerage Sharekhan. “We expect the double-digit earnings growth momentum to sustain in the coming quarters with domestic volume growth at 8-10 per cent. The acquisition of GSK Consumer’s heath food drinks business will add value to HUL’s foods business in long run,” he said.

Sanjiv Mehta, chairman and managing director, HUL, said, he expected the GSK Consumer business to be merged with HUL by the end of the 2019 calendar year. “We have said that the merger process will take a year and we stand by it,” he said when addressing queries on the same. Mehta also struck a note of caution with regard to consumer demand in the future.


“While consumer demand was stable during the (December) quarter, we will have to see how it goes in the future. The rural demand is ahead of urban, but the macro-economic environment will be a key watch out. Our focus will continue to be on volume growth and improvement in operating margins,” he said.


On the segment front, HUL’s home care revenue rose 14.8 percent to Rs 3,148 crore. Revenue from the beauty and personal care segment grew 10.9 per cent to Rs 4,539 crore, while food and refreshment revenue rose 9.9 per cent to Rs 1,728 crore.


HUL’s stock price closed trade on Thursday 1.12 per cent down on the BSE to Rs 1750.10 a unit.

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