Missing analysts’ estimates, Hindustan Unilever (HUL), India’s largest fast moving consumer goods (FMCG) company, has reported a lower net profit of Rs.962 crore for quarter ended September 30, 2015, compared to Rs.988 crore in the same period last year, down 2.63 per cent.
The profit before interest and tax (PBIT) grew by seven per cent and PBIT margin improved by 40 basis points. The profit after tax before exceptional items, grew by one per cent to Rs.970 crore.
During the period, the company’s total income increased to Rs.8,125.5 crore from Rs.7,837 crore for the same period last year, up 3.68 per cent.
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The growth rate (in profit was) impacted by the exceptional income from the sale of properties in the base quarter and a higher effective tax rate,” HUL said. Price cuts across its product offerings also impacted margins.
“The business delivered another quarter of profitable volume-led growth. We continue to invest behind our brands and in-market executional capabilities to drive the competitiveness of our portfolio,” Harish Manwani, Chairman, HUL said.
“The deflationary commodity cost environment is likely to continue in the near term and our strategy of delivering consistent and competitive growth with sustainable improvement in operating margin remains unchanged,” he added.
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HUL said lower input costs resulted in a 320 basis points reduction in cost of goods sold. Brand investments were sustained at competitive levels across segments and overall advertising and promotion spend was up Rs.220 crore.
During the quarter, HUL’s domestic consumer business grew by five per cent, with seven per cent underlying volume growth. “The growth in the quarter was continued to be impacted by the phasing out of excise duty incentives and price de-growth, as the benefit of lower commodity costs was passed on to consumers,” HUL said.
Interim dividend The board of directors have declared an interim dividend of Rs.6.5 per equity share of face value Re.1 each, for the year ending March 31, 2016.
HUL said during the quarter its soaps and detergents business witnessed robust volume growth but the benefit was partially offset by price deflation.
Skin cleansing business was driven by double digit volume growth and its liquids portfolio registered another quarter of robust growth. In laundry, growth was led by the premium segment.
The company said its household care growth was driven by Vim. The segment witnessed further price deflation in the quarter due to soft commodity costs.
The company’s personal products reported double digit growth. Skin care products delivered broad based growth while hair care maintained its momentum with another quarter of volume led double digit growth, the company said.
HUL’s beverages business reported steady performance. The company’s packaged foods business saw double digit growth across all key brands. In ice creams, Kwality Walls had a good quarter while Magnum continued to perform well.
The company said its water purifier brand Pureit continued to drive the performance with a focus on modern trade and in-store execution. Soon after announcement of the result, HUL shares tanked but recovered a bit soon after to finally close with a loss of 1.85 per cent at Rs.797.40 on the BSE.