June quarter: Weak consumers sentiments see Hindustan Unilever’s volumes grow 5%

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Published: July 24, 2019 1:03:09 AM

The home care segment’s revenue saw a growth of 10.13% to Rs 3,465 crore while beauty and personal care revenues grew 4.12% to Rs 4,589 crore.

Earnings before interest, tax, depreciation and amortisation (Ebitda) increased 17.59% to Rs 2,647 crore while the margins for the quarter stood at 26.17%.

FMCG major Hindustan Unilever (HUL) on Tuesday reported a rise in revenues of just 6.61% year-on-year in the three months to June, owing to weak volumes which grew at only 5% y-o-y, the slowest in seven quarters. Revenues for the quarter stood at Rs 10,114 crore, a tad lower than the Bloomberg consensus revenue estimate of Rs 10,170.85 crore. HUL’s stand-alone net profit at Rs 1,755 crore in Q1FY20 marked an increase of 14.78% y-o-y.

HUL chief financial officer Srinivas Phatak said the firm expects demand to remain subdued in the near term. “We expect the near-term demand to remain a bit subdued given the macroeconomic environment. Commodities and currency will continue to remain volatile,” he said.

Phatak observed that rural income growth net of inflation was in low single digits. “There is no additional impetus which is coming. Food inflation again is very low and this is important because this is income in the hands of rural consumers. So, I am giving you two indicators without getting into employment and there has been a moderation,” the CFO said. Phatak pointed out that if there is a moderation, people would tighten their belts a bit and, therefore, consumer sentiment does come down. “That’s where we are today. And that’s why we are saying we expect near term to be subdued but in the medium term, the fundamental attractiveness has not changed,” Phatak said.

HUL Chairman and MD Sanjiv Mehta said at a press conference the numbers needed to be viewed in the context of the preceding couple of years when the growth was, in large measure, propelled by the GST benefits which were passed on. “Having said that, a 5% volume growth is pretty decent for a large company like ours,” Mehta said. Mehta further explained that rural demand has not stopped growing. “Rural is still growing at a rate which is more or less than the urban rate. But it has a potential to grow at a much faster rate because the penetration and consumption levels are low,” he said.

Margin expansion was driven by improved mix, leverage in operating and advertising spends and savings agenda, HUL said. Earnings before interest, tax, depreciation and amortisation (Ebitda) increased 17.59% to Rs 2,647 crore while the margins for the quarter stood at 26.17%.

The home care segment’s revenue saw a growth of 10.13% to Rs 3,465 crore while beauty and personal care revenues grew 4.12% to Rs 4,589 crore. Within beauty and personal care, personal products performance was steady while personal wash witnessed a muted delivery particularly in the popular segment. Skin care registered broad based growth across brands.

HUL also pointed out it has received app-roval from its shareholders and creditors for the proposed merger with GSK CH and subject to NCLT approvals, is on track to complete the integration of the business before the 2019-end. HUL shares ended the day’s session 0.86% up at Rs 1693.20 on the BSE.

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