The country’s largest fast moving consumer goods company, Hindustan Unilever (HUL), on Monday beat street estimates on all fronts. The company registered a 26% y-o-y increase in profit after tax before exceptional item at Rs 1,409 crore in the January-March quarter.
The country’s largest fast moving consumer goods company, Hindustan Unilever (HUL), on Monday beat street estimates on all fronts. The company registered a 26% y-o-y increase in profit after tax before exceptional item at Rs 1,409 crore in the January-March quarter. The performance was on the back of a stellar volume growth which at 11% was above expectations and domestic consumer sales growth across segments, driven by rise in consumption across categories.
The exceptional item of Rs 64 crore includes deferred consideration payable on the account of Indulekha buy. The net profit after adjusting the exceptional item stood at Rs 1,351 crore, up 14% y-o-y. Revenues increased by a tad 3% y-o-y to Rs 9,003 crore, remaining above estimates, which the company said was due to the accounting impact with the implementation of GST. The company’s comparable domestic consumer growth was 16%, led by the home care category, which grew 21%, refreshment 14%, personal care 13% and foods 10%.
According to Bloomberg estimates, HUL was expected to post net profit of Rs 1,333 crore on revenues of Rs 8,898 crore. The company said according to the requirements of Sebi, revenue for the quarter ended March 31, 2017, was reported inclusive of excise duty. However, GST replaces excise duty and other input taxes. Hence, as per IndAS 18, the revenue for the quarter ended March 31, 2018, is reported net of GST.
Ebitda (earnings before interest, tax, depreciation and amortisation) stood at Rs 2,048 crore, an increase of 24% y-o-y. Comparable ebitda margin improvement is 160 basis points over the year earlier, due to lower cost of goods sold, supported by the strong savings programme. For the full year ended March 31, 2018, HUL reported a 17% rise in net profit to Rs 5,237 crore compared to last year, while the sales were up 2% at Rs 34,619 crore. Ebitda for the full year increased 20% to Rs 7,276 crore, while comparable operating margin improved 155 basis points at 21.02%.
Speaking at a news conference, Srinivas Phatak, HUL’s CFO said trade conditions have normalised. “Post-GST implementation we had seen adjustment which had happened in the channels, but now trade pipelines are stable,” he said, adding that there is a gradual improvement in demand which is broad-based, but the input costs continue to rise in select categories.
The comparable domestic consumer sales growth and comparable ebitda margin improvement has been arrived by adjusting excise duty and other net input taxes from reported sales of the March 2017 quarter and GST refunds to the reported sales of the March 2018 quarter.
Like the December 2017 quarter, Phatak said, due to paucity of time, entire benefit of the November 15 GST rate reductions on some of the pipeline stocks could not be passed on to the end consumers. “An estimated value of Rs 124 crore has been proactively disclosed to the authorities on this count and we offered to pay this amount suo motu to the government. This amount is not recognised as revenue and is accounted as a liability as on March 31, 2018,” Phatak said. This number stood at Rs 119 crore in the October-December 2017 period. The company added that on behalf of the redistribution stockists, it has offered to pay Rs 36 crore towards additional realisation which would have been made by them on their closing stock at the point of transition.
Harish Manwani, chairman, HUL, said: “Despite a step-up in competitive intensity, we have delivered another strong performance for the quarter and the year. Growth and improvement in profitability have been sustained through a combination of winning innovations and a relentless focus on operational efficiencies.”