Friday, January 15, 2016

HUL Q3 profit drops 22%, volume growth at three quarter low

The country's largest consumer goods company Hindustan Unilever (HUL) reported a net profit of Rs 971 crore, down 22.4% YoY for the quarter ended December 2015. Volume growth came at 6%, lowest in three quarters. This has come as a huge disappointment for the market. HUL's sales, seen as a barometer of Indian consumer sentiment, have been hit in recent months due to weak demand from rural India, which is facing the second straight year of drought. About 35% of HUL's revenue comes from India's villages.

The company, which had posted a net profit of Rs 1,252.17 crore in the year-ago period, also said its board has approved transfer of Rs 2,187.33 crore from its general reserves to the profit and loss account to be paid out to shareholders.

Revenue rose 2.7% to Rs 7,981 crore from Rs 7,774 crore.

Revenue rose 2.7 percent to Rs 7,981 crore from Rs 7,774 crore.

In the September quarter, HUL profit had declined 2.6% to Rs 962.2 crore. This came on the back of slower growth in revenue and operating income. Higher tax rate had also hurt net profit, while operating margins were crimped due to price cuts.

For the second quarter, HUL's net sales increased 4.1% to Rs 7,955 crore versus Rs 7,639 crore in the corresponding last year. The company had missed analysts expectations both on the topline and bottomline fronts for the quarter.

For the third quarter, Bloomberg consensus estimates pegged net sales at Rs 8,122 crore and net profit at Rs 1,036 crore.

"The growth in the quarter continued to be impacted by the phasing out of excise duty incentives and price de-growth, as the benefit of lower commodity costs was passed on to consumers," Hindustan Unilever Ltd said.

Addressing a conference call, HUL Chief Financial Officer P B Balaji said the impact would continue to be felt in the next quarter as well.

"Besides, some of the products in the personal care segment were impacted by delayed winter this season," he said.

On the outlook, HUL Chairman Harish Manwani said: "In an environment of moderating growth and benign input costs, we remain focused on innovation and market development to drive volumes competitively whilst improving operating margins."

HUL's expenses in the third quarter were up 1.78% at Rs 6,632.34 crore, as against Rs 6,515.90 crore a year ago.

However, its tax expense was down 15.70% to Rs 437.20 crore compared to Rs 518.66 crore of the same period last fiscal.

On the transfer of Rs 2,187.33 crore from its general reserves to the profit and loss account, HUL said it has built up significant reserves over the years through the transfer of profits to the General Reserves.

"Given HUL's strong financial position and track record of cash generation, the funds represented by such accumulated general reserves is seen to be in excess of the company's current and anticipated needs... HUL has proposed a scheme between the company and its shareholders to give effect to the proposed transfer and its subsequent payout," it said.

During the quarter, HUL said, revenue from soaps and detergents segment was up 0.82% at Rs 3,629.82 crore, as against Rs 3,600.22 crore a year ago.

The robust volume growth in soaps and detergents segment was offset by price deflation and it witnessed continued price deflation in the quarter given the benign input costs, HUL said.

HUL stock closed at Rs 804.15, down 2.70%, after hitting a 52-week low of Rs 776.60 on the BSE.

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