The HUL stock skyrocketed 7.5 per cent to register an all-time high of Rs 477.9 on the BSE on Tuesday. In the past year, the blue-chip is up 44 per cent, roundly beating the 21 per cent return of the BSE FMCG index.

Hindustan Unilever has resumed higher spending on advertising and promotions, having won leeway from input cost savings. In the June quarter, adspend for the FMCG behemoth stood at 13.1 per cent of sales, almost two percentage points more than the comparable 2011 quarter. This puts an end to HUL’s economising on ad costs for the past five quarters.

Sales for HUL clocked yet another quarter of double-digit growth at 13.7 per cent over the year-ago period, underlined by good nine per cent volume growth. Operating profits were up a strong 27 per cent, helped by economies in other expenses, besides material cost savings. Operating margins, therefore, improved to 13.1 per cent in the June 2012 quarter against the 11.8 per cent in the year-ago quarter.

HUL’s largest segments of soaps and detergents and personal products maintained its strong pace of growth, up 24 and 17 per cent respectively in the June quarter compared to the year-ago period. The premium-priced segment, especially in detergents and skincare, buttressed growth.

But packaged foods, in which growth had been floundering for three earlier quarters, bounced back with a 17 per cent revenue expansion in June quarter. Successful launches in Kwality Walls, good volumes in the Kissan range — especially in ketchups, pushed growth. The segment’s margins, however, showed minimal improvement.

The beverages segment, however, in which growth dwindled into single digits in the March quarter slipped further. But efforts to push premium brands in coffees through the Bru range, apart from lower coffee prices, helped improve segment margins by three percentage points to 15 per cent in the June quarter.

Adspends up

Materials consumed as a proportion to sales (including traded goods) dropped to 54 per cent in the June quarter compared to the 56 per cent in the year-ago period.

The higher input costs of previous quarters had forced HUL to cut back on advertising to maintain margins. The let up now, together with the stiff competition across most categories, prompted a return to higher adspends.

This adds momentum to the slight recovery in promotional spending seen in the March quarter. Given HUL’s dominance in categories such as soaps, detergents and personal products, an adspend increase could push other consumer companies to follow suit.

>acharya@thehindu.co.in

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