COMMENT. GST transition leaves minimal impact on HUL bl-premium-article-image

Parvatha Vardhini C Updated - January 11, 2018 at 03:14 PM.

The topline growth was helped by price increases taken in the previous quarters. Driven by mass detergent brands and premium brand Surf, the home care segment helped the top-line by clocking good revenue growth of 6 per cent.

Despite flat volumes due to de-stocking by traders ahead of the GST implementation, HUL clocked an overall sales growth of 5 per cent to ₹9,094 crore in the June 2017 quarter over the same period in 2016.

The topline growth was helped by price increases taken in the previous quarters. Driven by both mass detergent brands such as Wheel and Rin as well as the premium brand Surf, the home care segment (which brings one-third of the company’s total sales) helped the top-line by clocking good revenue growth of 6 per cent.

Refreshments (which constitutes about 15 per cent of total sales) also contributed to the top-line growth with tea (Taj Mahal, Red Label, 3 Roses, Lipton), coffee (Bru), ice-cream and frozen desserts (Magnum, Wall’s) seeing a robust quarter.

The personal care segment (which brings almost half the revenues for the company) that was the dampener. Growth in this segment was impacted due to non-procurement by the CSD canteens beginning first week of June, in the run-up to GST implementation.

However, the company managed a net profit growth of a higher 9.3 per cent in this period to ₹1,283 crore, thanks to benefits at the operating level. A cooling off of input prices brought down raw material costs as a percentage of sales to 44.3 per cent, compared with 46.3 per cent a year ago.

Besides, a marginal 20 basis points decrease in advertising expenses also helped. Operating margins expanded by 160 basis points over the June 2016 quarter to 20.2 per cent now. Each of the home care, foods and refreshments segment saw good expansion of 2.3-8 percentage points in the margins.

Outlook

In the months to come, lower prices of products in categories such as hair oil, detergent bars, skin cleansing soaps and toothpastes under the GST regime will drive volumes for the company.

Besides, measures to improve rural incomes, farm loan waivers, good khariff sowing and normal monsoons favour a pick-up in rural demand. HUL derives about 40-50 per cent of its revenues from rural India. While at present rural sales is growing at the same pace as urban sales, the company hopes to see it grow at 2-2.5 times urban sales. Input costs too, are expected to remain stable in the near to medium-term.

The company is also strengthening its ‘naturals’ portfolio to take on competitors such as Patanjali.

The first quarter saw the launch of the ‘Citra’ brand of face care products under this banner. The company is also rolling out its ‘Lever Ayush’ ayurvedic range of personal care products pan-India, after successfully test marketing it in a few States.

Published on July 18, 2017 17:07