Hindustan Unilever Ltd. reported a 10% fall in net profit to ₹920 crore (excluding exceptional income of ₹159 crore) as net sales fell 1% to ₹8,318 crore in the aftermath of the government’s demonetisation exercise.
A drop in advertisement expenses and a one-time gain from the sale of surplus properties helped the maker of Lux soap and Rin detergent to offset a demand slowdown due to the effects of demonetisation.
Harish Manwani, chairman of the Indian unit of the Anglo-Dutch consumer giant Unilever said the gradual recovery of the market was temporarily impacted by adverse liquidity conditions.
“However our performance demonstrated resilience and agility in this challenging environment. There are early signs of normalisation and our focus continues to remain on innovation-led volume growth and improvement in margins,” said Mr. Manwani.
Paras Bothra, head of equities at Ashika Stock Broking, said that HUL would have missed bottom-line growth if exceptional income was excluded. “The profit increased only due to exceptional income,” said Mr. Bothra.
Recovery in December
HUL CEO Sanjeev Mehta said that while there was a major impact of demonetisation in the first two weeks after November 8, there was a recovery in December.
“Demand is likely to stabilise by the first quarter of the new financial year,” he said.
Mr. Mehta said rural demand remained under stress due to liquidity issues but he expected the monsoon and government support to ease the situation.“We expect a fillip for the rural consumers in the Budget and we expect that the government will ensure the creation of more job and incentives that will lead to more money in the hands of people. This will boost consumption,” he said, adding that steps like demonetisation and the GST roll-out that helps create a level playing field in any sector is good for the economy.
During the quarter, the squeeze in liquidity resulted in reduced trade pipelines and lower consumer offtake, said a company statement adding that the impact was varied across segments, channels and geographies.
“We responded to these adverse market conditions with speed by rejigging our supply chain, supported our channel partners by extending credit and enhanced our direct distribution coverage,” said the statement.
HUL’s EBITDA margins was down by 80 basis points (bps) while EBITDA was down by 5% to ₹1,355 crore as the cost of goods sold was higher by 60 bps due to rising input costs.
Meanwhile, the company has appointed Dev Bajpai as director on the board of the company. HUL shares on BSE rose marginally to ₹863.25 on Monday, valuing the company at about ₹1.87 lakh crore.
