HUL drags parent’s performance

Priyanka Pani Mumbai | Updated on January 16, 2018 Published on October 14, 2016

Unilever’s Q3 turnover flat at $15 b on price hikes in India as commodity turned pricier

India along with China were responsible for global consumer goods giant Unilever Plc’s tepid financial performance in the third quarter (July-September) of the calendar year 2016.

The Anglo-Dutch consumer products maker’s turnover was flat at $14.7 billion during the quarter.

Unilever in its Q3 trading statement and earning’s presentation has mentioned that the growth in the quarter slowed reflecting weaker market growth.

While sales in China were down due to intense price competition from local brands in laundry and some de-stocking related to the continued rapid channel shift to e-commerce,in India, price hikes in skin cleansing products due to rising commodity costs have dampened the consumer demand for the category in the quarter.

Unilever’s Indian arm Hindustan Unilever (HUL), which is also the largest consumer goods maker in the country by both value and volume terms, in the last quarter had warned that the near term market growth in India is likely to remain muted given the fact that the volume growth is under pressure due to bad monsoon for the last two years and higher commodity costs which have largely impacted the rural consumption.

However, it was optimistic of a steady pick-up in demand, if the monsoons were normal.

Meanwhile, a Crisil report said private consumption is set to get a 90 basis points (bps) monsoon boost following the best-distributed rainfall in the last three years.

Analysts feel that with rural consumption going up, most of the FMCG companies, including HUL, would see good growth in revenues.

Analysts have forecast a 3 per cent volume growth for HUL in the July-September (Q2) in this fiscal, which could be lowest for the maker of Dove and Ponds in the last several quarters. Last quarter’s volume growth was at 4 per cent.

However, a Crisil report has said that the aggregate revenue of FMCG companies is expected to increase 6-7 per cent y-o-y.

It expects the EBITDA margin to improve by nearly 83 basis points (bps) y-o-y to 23.9 per cent, due to a decline in the prices of raw materials, such as brent crude, PFAD (Palm Fatty Acid Distillate) and copra.

“For HUL, soft input cost and lower advertisement and promotion expenses will aid margin expansion,” it added.

Published on October 14, 2016

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