Despite a dent in demand due to demonetisation, Hindustan Unilever on Monday beat Street estimates to post a 7% year-on-year jump in net profit to Rs 1,037 crore for the three months to December. Excluding exceptional gains of Rs 159 crore, the firm’s net profits fell 10% y-o-y. Underlying volumes at the country’s biggest producer of consumer staples, however, dropped 4% while net sales stayed flat at Rs 8,124.48 crore.
HUL’s FMCG volumes have been under pressure for several quarters now; in Q2FY17, for instance, volumes contracted 1% while in the two previous quarters they grew just 4% y-o-y.
The management noted that wholesale channels had been seriously impacted by the shortage of cash in the system and that initially the stock in the wholesale stock had gone down. While the basket size for consumers had shrunk, the frequency had increased. The southern and western markets were less affected than areas in the north and central regions. However, the recovery had begun with urban markets recovering faster than rural markets. The management said it had extended credit to help the trade.
Sales from the personal care, infant and feminine care divisions fared only modestly. The firm’s operating profit (Ebitda) during the quarter declined 5.2% to Rs 1,355.4 crore while operating margins were down at 16.3% against 17% in Q3FY16.
“We responded to these adverse market conditions with speed by rejigging our supply chain, supported our channel partners by extending credit and enhanced our direct distribution coverage. We also sustained our brand building spends and our innovation initiatives. Despite the short-term challenges of the quarter, the premium part of our portfolio continued to perform well,” HUL said.
Chairman Harish Manwani said, “The gradual recovery of the market was temporarily impacted by adverse liquidity conditions. However our performance demonstrated resilience and agility in this challenging environment.”
There are early signs of normalisation and our focus continues to remain on innovation led volume growth and improvement in margins. Our strategic agenda of delivering consistent competitive profitable and responsible growth remains unchanged.”
Under the home care segment premium laundry performed well, with sustained double-digit growth in the detergent category, Surf. Home care liquids too had a good quarter, the company said.