Despite challenges like demonetisation and the GST switch over, Hindustan Unilever has been reporting good numbers in the March and June quarters of 2017. This trend has continued into the September quarter.

After zero domestic consumer sales growth in the December 2016 quarter (over December 2015) due to the impact of demonetisation, the company has seen an uptick since. After growing by 8 per cent and 5 per cent, respectively, in the March and June 2017 quarters domestic consumer sales are up 10 per cent in the September 2017 quarter. Both volumes and realisations contributed to this growth.

Volumes grew 4 per cent and the remaining 6 per cent was price-led. Volumes were helped by good offtake in key segments such as home-care and personal-care. Volumes also got a leg-up from lower GST rates. In this segment, the company took 3-4 per cent price cuts in soaps, detergent bars, and toothpastes to pass on net GST benefits.

Margin expansion

Advertising spends as a percentage of revenues increased from 11.4 per cent in the three months ended September 2016 to 12.5 per cent now. The company rolled out its ‘Lever Ayush’ Ayurvedic range of personal-care products nationally during the quarter. Yet, lower raw material costs and cost-control efforts helped EBITDA margins improve from 18.8 per cent a year ago to 20.5 per cent now. Thanks to good topline growth and margin expansion, adjusted profits grew 14 per cent to ₹1,276 crore.

Lower prices of detergent bars, skin cleansing soaps and toothpastes under the GST regime will drive volumes. The roll out of Ayurvedic products will also help it take on competition. Besides, measures to improve rural incomes, farm loan waivers, and higher MSP for the rabi crop favour rural demand. HUL derives 40-50 per cent of its revenues from Bharat.

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