HUL Q2 net up 8.13% at Rs 988 cr

Written by fe Bureau | Mumbai | Updated: Oct 28 2014, 05:07am hrs
FMCG major Hindustan Unilever ( HUL) on Monday posted its earnings largely in line with market expectations, with the company's standalone net profit growing 8.13% at R988.16 crore for the July-September quarter. The company, which sells Dove soap and Lipton tea, reported 10.64% increase in net sales during the period at R7,465.54 crore on the back of sales of soaps and detergent which grew at a double-digit percentage pace along with skincare products. However, the company warned that a weak economy would lead to lower consumer spending.

Announcing the results, PB Balaji, chief financial officer of HUL, said,"During the quarter, domestic consumer business grew at 10% ahead of markets with 5% underlying volume growth. Our operating profit is up by 16% at R1,166 crore.

According to him, demand for FMCG products continues to remain soft and despite headwinds, the company has posted competitive and profitable growth. "During the quarter under review, our advertising & promotions (A&P) spend was lower than last year by 175 bps, he added.

HULs overall expenses during the period stood at R6,473.68 crore against R5,871.25 crore in the year-ago period.

Commenting on the company's performance, Abneesh Roy, associate director at Edelweiss Securities, said most of HULs margin expansion is because of a sharp cut in ad spends by 175 bps YoY. A&P spend as a percentage of sales stands at 12.1% (A&P down both YoY and QoQ) which is second lowest in the last 11 quarters, HULs sales growth in personal products at 9.9% YoY was much lower than 15% growth seen in Q1FY15, he added.

Harish Manwani, chairman of HUL said, "In a low growth environment, our emphasis on market development and innovations has helped deliver another quarter of double digit growth and a healthy improvement in operating margins".

On HULs e-commerce plans, Manwani said it is building its capabilities in the e-commerce channel recognizing the growing importance of this medium. ''Globally, we have created a dedicated team that is looking at e-commerce across our key markets including India. We are planning to bring the best practices in this channel to other countries,'' he added. According to Manwani, HUL will work with its current set of customers to get a fair share of the e-commerce platform. "If Amazon comes into the grocery sector in India we must be a part of it, he added.