Hindustan Unilever Ltd reported an 18 per cent growth in its net profit to Rs 1,252 crore compared to Rs 1,062 crore in the corresponding period last year. The increase has been primarily due to an exceptional gain of Rs 396 crore from the sale of property, including its erstwhile head office in South Mumbai to HDFC.
But the big concern was that volume growth was at 3 per cent compared to 4-6 per cent volume growth in the last eight quarters.
P.B Balaji, CFO, HUL, said, “It is a volatile environment in which discretionary spends have been under pressure. However, we have passed on the benefits of falling commodity prices to consumers with lower prices. Categories like oral care was impacted due to strong competition and phasing out of excise duty benefits.’’
Net sales increased by 7.7 per cent from Rs 7,037 crore to Rs 7, 579 crore during the quarter. Revenues grew by 6 per cent for its largest segment of soaps and detergents from Rs 3,397 crore to Rs 3,600 crore. Personal products saw revenues record a 6.5 per cent jump to Rs 2,454 crore. However, beverages posted higher revenue growth at 8 per cent from Rs 850 crore to Rs 919 crore while packaged foods revenues increased by 12 per cent from Rs 372 crore to Rs 419 crore.
Drop in crude oil price has resulted in 5-10 per cent cut in pricing of HUL products across all categories. “We were quick in cutting price because of which brands have become more accessible. We took the hit in the quarter to stay competitive but it is natural to expect growth in volumes,” said Sanjiv Mehta, Managing Director & CEO, HUL adding that it will take another quarter or two before the impact of better economy starts translating into growth for FMCG sector.
But there continue to be concerns for certain categories like personal and oral care. While rural markets continue to grow, users are moving to smaller packs. “In personal care our volumes have not grown and there has been a shift from huge to small packs. But we hope our margins increase as consumers gain confidence and move from sachets to bottles,’’ Mehta said.
Mehta said the rate cut by the RBI is expected to pick consumer demand. “The rate cut will lead to virtual spiral as disposable incomes will go up leading consumers spend more on our products,’’ the HUL chief said.
Shares of HUL dropped by 5.27 per cent and closed at Rs 892.80 crore on Monday.