Beats expectations handsomely by reining in expenses; to pass on lower benefits of lower levies to customers.
Shrugging aside GST woes, Hindustan Unilever (HUL) on Tuesday reported a smart 15% year-on-year rise in net profits before exceptional items at Rs 1,292 crore for the three months to June. The numbers were well ahead of analysts’ estimates and the management indicated demand from rural markets was picking up. The FMCG major posted a 160-basis-point year-on-year jump in operating margins to 21.9 % thanks to a check on costs.
Total volumes remained flat during the quarter but revenues rose 5.2% y-o-y, driven by good volumes in the home care and food segments. HUL’s share ended Tuesday at a lifetime high of Rs 1,158.20 on the BSE. The earnings announcement was made after market hours.
The roll-out of the goods and services tax (GST) has not had too much of an impact on business, the management indicated at a news conference.
PB Balaji, executive director, finance, and chief financial officer, noted that the transition to GST has been by and large smooth with little disruption to trade. “It will take some time before wholesalers get back to a normal restocking pattern. Trade pipelines have thinned and small traders are not clear on the rules,” Balaji said. Volumes in the personal care segment had suffered, he said, with wholesalers in de-stocking mode.
HUL has passed on the net benefits from lower excise duties on products such as soaps and toothpaste “at a company level” to customers. “In some product categories prices have been reduced and a further reduction is anticipated,” the CFO explained. The benefit will be passed on either as a reduction in the MRP or by increasing the weight for the same MRP, he added.
HUL’s earnings before interest, tax, depreciation and amortisation rose 14% to `1,866 crore y-o-y. Expenses were reined in; advertising spending as a share of sales, for instance, was marginally lower during the quarter.