HUL Q3 disappoints, net down 22% on provision; volume growth 6%


Hindustan Unilever ‘s October-December quarter earnings disappointed analysts
on Friday with profit sinking 22.4 percent year-on-year to Rs 971 crore despite lower raw material prices. Exceptional loss, slow revenue growth and lower other income hurt profitability.

Revenue increased 2.7 percent to Rs 7,981 crore in quarter ended December 2015 compared to Rs 7,774 crore in corresponding quarter of last fiscal with volume growth of 6 percent.

The FMCG major in its filing says quarterly growth continued to be impacted by phasing out of excise duty incentives and price de-growth as benefit of lower commodity cost was passed on to consumers.

Topline and bottomline missed analysts’ expectations while volume growth matched lower end of estimates. Profit was expected at Rs 1,073 crore (down 14 percent) and revenue at Rs 8,220 crore (up 5.7 percent) with volume growth range of 6-7 percent for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

Operating profit (earnings before interest, tax, depreciation and amortisation) rose 7.5 percent on yearly basis to Rs 1,430.8 crore and margin expanded by 80 basis points to 17.9 percent in the quarter, aided by lower input cost.

Cost of raw material declined 7.4 percent year-on-year to Rs 2,689.4 crore on account of fall in crude oil prices. Advertising & promotion expenses were down 0.6 percent to Rs 1,137.8 crore in same period.

“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,” says Harish Manwani, Chairman.

The company reported an exceptional loss of Rs 79.6 crore for the quarter, increased compared to Rs 12.14 crore in same quarter last fiscal due to provision towards restructuring & select contested matters of Rs 116.52 crore. Exceptional item also included profit of Rs 36.91 crore on sale of surplus properties.

Other income declined 18 percent to Rs 139.6 crore during the quarter from Rs 170.2 crore in a year-ago period.

HUL says soaps & detergents segment witnessed continued price deflation in the quarter given benign input costs. This business registered a 0.8 percent growth in revenue at Rs 3,629.82 crore with earnings before interest and tax (EBIT) rising 1.3 percent and margin expansion of 7 basis points compared to year-ago period.

Revenue from personal product increased 5.6 percent year-on-year to Rs 2,592.9 crore with its EBIT up 10 percent and margin rising 120 basis points. Reported growth of this segment was impacted by delayed winter and one-time realignment of channel spends undertaken with a view to driving its effectiveness in the marketplace, says the FMCG major.

Beverages business showed 7 percent growth during the quarter with EBIT rising 22.5 percent and margin expansion of 230 basis points year-on-year.

The scrip of Hindustan Unilever closed at Rs 804.15, down 2.70 percent after hitting a 52-week low of Rs 776.60 on the BSE.