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Informist, Wednesday, Oct. 23, 2024

 

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--Jul-Sept net profit INR 26.12 bln
--Analysts saw HUL Jul-Sept net profit INR 27.08 bln
--Jul-Sept net profit INR 26.12 bln vs INR 27.17 bln year ago
--To pay INR 29 per share interim dividend
--Jul-Sept revenue INR 155.08 bln vs INR 152.76 bln year ago
--Jul-Sept EBITDA 36.47 bln rupees vs 36.94 bln year ago
--Jul-Sept EBITDA margin 23.8%, down 80 bps on year
--Apr-Sept net profit INR 51.50 bln vs INR 51.89 bln year ago
--INR 29 per share interim dividend includes INR 10 special dividend
--Apr-Sept revenue INR 308.47 bln vs INR 304.24 bln year ago
--Jul-Sept home care segment sales INR 57.31 bln vs INR 53.08 bln yr ago
--Jul-Sept food, refreshments ops sales INR 38.03 bln vs INR 38.51 bln
--Jul-Sept beauty, wellbeing ops sales INR 34.21 bln vs INR 33.37 bln
--Jul-Sept personal care ops sales INR 24.11 bln vs INR 25.36 bln yr ago
--Jul-Sept advertising, promotion spend INR 14.64 bln vs INR 17.20 bln
--Jul-Sept gross margin 50.4%, down 150 bps on year
--Underlying volume grew 3% on year in Jul-Sep vs 4% rise Apr-Jun
--Homecare segment Jul-Sept margin 19%; beauty, well-being margin 34%
--Personal care segment Jul-Sept margin 17%
--Foods, refreshment segment Jul-Sept margin 18%
--Expect demand trends will be stable
--Will maintain EBITDA at 'current healthy level'
--See low single-digit price growth if commodity prices stay stable
--Focus on driving competitive, volume-led growth
--To continue investments in brands, long-term strategic priorities
--To maintain cost savings through net productivity programme
--Personal care declined 5% due to negative pricing
--Personal care dn on low-single digit volume fall
--Foods, refreshments declined 2% due to low-single digit volume fall
--CEO: Saw moderating growth in urban markets, gradual recovery in rural

 

By Anshul Choudhary

 

MUMBAI – Hindustan Unilever Ltd. reported a year-on-year decline in its net profit during the September quarter and failed to extend the growth seen in the previous quarter. The company's net profit fell nearly 4% as its raw material costs rose on year after five quarters.

 

The fast-moving consumer goods major reported a net profit of INR 26.12 billion as compared with INR 27.17 billion in the same period the previous year. This was below analysts' estimates which had predicted the net profit would be flat on year.

 

The company's revenue from operations, which includes revenue from the sale of products and other operating income, rose a mere 1.5% on year to INR 155.08 billion in the September quarter. This was also below analysts' estimate of over 3% growth in revenue.

 

Revenue growth during the quarter was below estimates due to lower-than-anticipated volume growth. The company's underlying volume rose 3% on year, while most brokerages had expected it to rise 5%. The company reported a rise of 4% in volume during Apr-Jun and a growth of 2% in Jan-Mar.

 

Revenue growth during the quarter was muted despite the low base of the September quarter last year, when sales had risen only 4%. Sales growth this quarter was below even the 2% growth reported in Apr-Jun. This slowdown in sales growth was likely due to moderating growth in urban markets, while the recovery in rural demand is still gradual. 

 

Revenue growth during the quarter was led by the company's home care segment, where sales rose 8% on year to INR 57.37 billion. The home care business houses products such as Vim, Surf Excel, and Rin. However, sales growth was affected by a decline of nearly 5% in revenue from its personal care segment, where the company announced price cuts. The segment reported a revenue of INR 24.12 billion in Jul-Sept. Among others, revenue from its beauty and well-being segment rose 1.5% on year to INR 33.23 billion, while the revenue from foods and refreshment was down 1.2% on year at INR 38.03 billion.

 

Though sales were higher in Jul-Sept, the company's profitability was affected by higher raw material costs, which rose after five quarters. The cost of materials consumed rose 4% on year to INR 45.98 billion and the cost of purchase of stock-in-trade rose 12% to INR 31.95 billion. This increase was largely due to inflation in prices of palm oil and tea, which rose by 10% and 25%, respectively, compared to the previous year, according to the company's investor presentation released after the earnings.

 

While the company's raw material cost rose, its expenses on advertisement and promotion declined to INR 14.64 billion in Jul-Sept, down nearly 15% on year. Despite this, the company's overall expenses rose faster than its revenue. Its expenses during the quarter were up nearly 3% on year at INR 122.65 billion.

 

Owing to higher expenses, the company's earnings before interest, taxes, depreciation, and amortisation margin declined to 23.8% in Jul-Sept, down 80 basis points on year. Its EBITDA declined slightly to INR 36.47 billion from INR 36.94 billion a year ago. The gross margin declined to 50.4%, down 150 bps on year.

 

For the six months ended Sept. 30, Hindustan Unilever reported a net profit of INR 51.50 billion, marginally down from the same quarter last year. Its revenue from operations during the same period was up 1.4% to INR 308.47 billion.

 

The company announced that it would pay an interim dividend of INR 29 per share, which would include a special dividend of INR 10 per share. The record date to determine eligible shareholders for the dividend is Nov. 6 and it will be paid to the shareholders on Nov. 21.

 

SEGMENTAL PERFORMANCE

Hindustan Unilever's volume growth was led by its largest segment of home care products, where underlying volume rose in the high single digit. The EBIT margin for the segment was 19% during the quarter, unchanged from last year. Within this segment, the liquid products saw double-digit growth in volumes. New launches in the segment also aided growth with the company foraying into the floor-cleaner market under its Vim brand.

 

The company's beauty and well-being segment saw muted performance with mid-single-digit growth in underlying volumes. During the quarter, the premium skin portfolio grew in the double digits, and hair-care products grew in the high single digit led by Sunsilk, Dove, and Tresemme. Growth in the segment was affected by the skin-care and colour cosmetics business, which grew in the mid single digit. The EBIT margin for the segment was 34% in Jul-Sept, compared with 31% in Apr-Jun. There is no comparable figure available for the segment for the previous year as the company only started reporting figures for beauty and well-being and for personal care separately from the June quarter.

 

The company's personal care segment, which includes its soap brands such as Lux and Lifebuoy, witnessed a volume decline in the low single digit despite price cuts during the quarter. The segment's EBIT margin was 17%, down from 18% in the June quarter, possibly due to the increased cost of palm oil. Again, there is no comparable figure available for the previous year. In the September quarter last year, the combined segment of beauty and personal care reported an EBIT margin of 27%.

 

Its food and refreshments segment reported a low-single-digit decline in volumes with EBIT margin at 18%, down from 19% a year ago. The company said it gained market share in the tea segment, but volumes of green and functional tea were subdued. Its coffee products grew in double digits, while the ice-cream segment's volume was flat on year.

 

OUTLOOK

Hindustan Unilever said it sees low-single-digit growth in product prices in the near term if commodity prices remain unchanged as demand trends are expected to be stable. The company plans to maintain EBIDTA at the current level, which it said was healthy. It said its focus remains on volume-led growth and would continue to invest in its brands. Further, reducing cost is also on the agenda through a productivity programme.

 

On Wednesday, shares of Hindustan Unilever closed at INR 2,659.30 on the National Stock Exchange, down 0.8%.  End

 

Edited by Vidhi Verma and Rajeev Pai

 

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