HUL Q3 net may fall; volume de-growth seen on demonetisation

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Hindustan Unilever net profit is likely to shrink 0.5 percent in October-December to Rs 967 crore from Rs 972 crore in corresponding quarter last fiscal. According to a CNBC-TV18 poll, its total income may also fall 4 percent at Rs 7450 crore against Rs 7764 crore in year-ago period. It is to be noted that the base quarter had an exceptional loss of Rs 79.6 crore.
Demonetisation is seen hitting the FMCG major’s business as margins may contract 40 basis points to 18 percent in Q3 from 18.4 percent (year-on-year). During the quarter, EBITDA may fall 6 percent at Rs 1345 crore versus Rs 1430 crore YoY. Most importantly, HUL’s volume growth may see a fall of 1-7 percent.

Analysts polled by CNBC-TV18 say higher raw material cost may impact gross margins, while lower advertising spends may limit EBITDA margin decline.

Earlier, in a conference call, HUL’s management had said demonetisation drive will lead to a short-term hit on demand and poor consumer sentiment, de-stocking and liquidity may squeeze wholesale channel. Analysts say the earliest time frame for volume recovery is now Q1FY8.