Signalling a firm revival in the consumer goods segment, Hindustan Unilever (HUL), the Indian arm of global consumer goods giant Unilever Plc, posted better-than-expected profitability and turnover for the quarter ended March 31, 2018.
HUL reported a 14% year-on-year rise in net profit to Rs 1,351 crore for the January-March 2018 quarter, while its turnover in the same period rose 2.5% to Rs 9,197 crore. A Bloomberg poll of analysts’ earnings estimates had pegged HUL’s estimated net profit at Rs 1,333 crore.
The most encouraging takeaway from HUL’s fourth quarter earnings for fiscal 2018 is a sharp 11% growth in volumes, which was far higher than a moderate single-digit growth of 5-6% that the Bloomberg poll had forecast.
Like in the case of other consumer goods firms such as Nestle India, which announced its earnings last week, growth in HUL’s reported turnover appears muted due to a change in accounting regulations post the introduction of Goods and Services Tax (GST), with effect from July 1, 2017. The company mentioned in its post-earnings statement that comparable domestic consumer growth for the quarter was up 16%.
HUL also reported an EBITDA (earnings before interest, tax, depreciation and amortisation) of Rs 2,048 crore for the quarter, with an EBITDA margin of 24%. Comparable EBITDA margin expansion in the March 2018 quarter vis-à-vis the same period last year was 160 basis points, HUL said.
“Cost of goods sold was lower, supported by the strong savings programme,” HUL said in its earnings statement, which was issued after market hours on Monday.
“We are particularly pleased with our track record of sustained margin improvement for the seventh consecutive year,” HUL chairman Harish Manwani said in the statement. “In the near term, we are seeing a gradual improvement in demand and this augurs well for the sector.”
HUL’s share price closed at Rs 1,504.95 apiece on the BSE on Monday, down 0.09%. The bourse’s benchmark S&P BSE Sensex ended the day at 35,556.71 points, up 0.06%.
For the full financial year 2017-18, HUL’s consolidated net profit stood at Rs 5,225 crore, up 16.4% from the fiscal 2017. HUL clocked revenues of Rs 36,622 crore in fiscal 2018, which was flat compared to the previous fiscal.
HUL’s post earnings commentary indicates that its business witnessed growth across segments such as home care, personal care and foods during the quarter.
A research report dated April 5 by Edelweiss Securities noted that a reduction in GST rates on certain products announced in November 2017 led to improved offtake for such consumer goods in the economy.
“We expect consumer goods companies to see revival on both fronts, on volume growth and margin expansion from here on,” said analysts Abneesh Roy, Alok Shah and Krish Kohli of Edelweiss in their note on the consumer goods sector. “With few state elections, expected populist budget, rural consumption should benefit. This coupled with improving macros and hopefully a good monsoon should also augur well.”