HUL beats expectations, net profit rises 9%
MUMBAI: Hindu stan U nil ever Ltd (H UL) on Tuesday reported June quarter earnings that beat analyst estimates as India’s largest packaged consumer goods maker cut costs and benefited from price increases in earlier quarters.
Flat volume growth and management commentary on volatility stemming from implementation of( G ST imply tough times for the sector.
The seller of Surf detergent and Kissan ketchup said profit rose 9.3% from a year ago to ₹1,283 cr ore in the three months to June 30. A Bloomberg poll of 10 ana- lysts had estimated HUL’s net profit at ₹1,183.5 crore.
Sales rose 4.8% to ₹9,222 crore, also beating an estimate of ₹8,619 crore by a Bloomberg poll. The company’s domestic consumer business grew 6%, HUL said.
“There was a cautious sentiment in trade in the run-up to GST,” said chief financial officer PB Balaji. “Rural markets remained challenging. Pricing action we took in Q3 (December 2016 quarter) helped (grow margins) and trade stocks were op ti ms ed .” H UL reported flat volumes as wholesale channels reduced inventory in anticipation of GST and the military canteen stores department (CSD) ceased to take stock for at least 45 days, Balaji said. The CSD’s moved a caused a 2% loss in volumes in the quarter, he added.
The flat volume growth in the June quarter came on the back of a 4% year-on-year rise in volumes in the March quarter.ITC also forecast that G ST will affect earnings in the current quarter.
“Trade pipelines are very thin,” said CEO Sanjiv Mehta. “There will be an impact (on earnings) since trade pipelines have shrunk.” However, he declined to comment on how quickly volumes will recover, saying it was difficult to predict a precise timeline.
Analysts said the company’s performance beat subdued expectations, even with flat volume growth. “Even flat volume growth is good news,” said Sachin Bobade, senior analyst at equities brokerage firm Dolat Capital. “We will see a jump in wholesale volumes in Q3 when things begin to stabilise and numbers are reported from a lower base owing to demonetisation in the previous year’s quarter.”
HUL also got a shot in the arm from stable input costs during the quarter. The firm’s earnings before interest, taxes, depreciation and amortisation margin — an indicator of profitability — rose 1.6 percentage points from a year ago.