The Hindu Business Line : Hindustan Unilever: Strong traction in topline continues

June quarter numbers of FMCG giant - Hindustan Unilever (HUL) have substantially exceeded street expectations and reaffirm that FMCGs - especially staples such as soaps, detergents and personal products - continue to be in a strong growth trajectory.

There is also evidence that HUL continues to enjoy pricing power to pass on input cost increases to its consumers. For the June quarter, the company managed to maintain its operating profit margins at a shade over 14 per cent, despite spiralling prices of inputs ranging from vegetable oils to packaging material.

There is also the fact that HUL’s sales growth for the quarter came as much from price increases as from volume growth in each of its segments. HUL’s diversified brand portfolio and presence across categories and price points has clearly played out in its favour in recent times. It appears to have enjoyed higher flexibility on pricing than some of its competitors who are more focused and have thus, faced margin pressures this quarter.

Impressive topline growth

HUL’s 21 per cent topline growth for the quarter (18.8 per cent in FMCGs alone) is an improvement over the previous two quarters (19.1 and 16.8 per cent) and impressive by virtue of HUL’s size. This was driven largely by robust growth in home and personal care (19.8 per cent), while the foods business (14.1 per cent) has disappointed.

Net profits, which have grown by 13.2 per cent, have failed to match topline growth. But that is not a cause for concern, as the slower growth in the bottomline is owed to exceptional items and not to lower profitability. HUL’s operating profits for the quarter matched the pace of sales growth, with profits before tax and exceptional items growing by a healthy 18.9 per cent.

High-ends pay off

The segment-wise break-down of the numbers suggests both strong and weak points to HUL’s business mix. The soaps and detergents business (20.7 per cent growth) and personal products (18.6 per cent) have both delivered strong growth. HUL’s attempts in these businesses to drive a better product mix through more high end launches is probably paying dividends in the form of better growth rates.

However, growth in the high-potential foods business has clearly moderated from its high levels last year.

The higher contribution from personal products, which bettered the product mix, is likely to have played a big role in HUL holding its operating profit margins this quarter.

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More Stories on : Personal Products | Performance | Microscope | Hindustan Unilever Ltd

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