HUL Q2 profit up 11 percent, high input costs hurt volume growth

Image: Danish Siddiqui / Reuters

In the near term, the company expects to see gradual improvement in market growth on the back of a good monsoon and festive season

Consumer goods major Hindustan Unilever (HUL) today reported a profit increase of 11.5 percent year-on-year to Rs 1095.60 crore from Rs 982.17 crore in the corresponding quarter in 2015. Net Sales also grew by 1.5 percent to Rs 8335.12 crore from Rs 7,819.64 in the corresponding quarter in 2015.

The earnings before interest, taxes, depreciation, and amortization (EBITDA) is up 5 percent to Rs 1405 crore and expanded by 60 bps. The company witnessed 2 percent increase in domestic consumer business with and an underlying volume growth of -1 percent for the quarter ended September 30.

A challenging business environment and increase in input costs in the personal care segment were cited as the major contributors to the negative volume growth. According to the company, input costs have increased almost 190bps on a year-on-year basis. The last time HUL witnessed a negative volume growth was in March 2009, when it reported a -4 percent volume growth owing to disruptive market conditions.

Revenue for the quarter grew by 1.6 percent to Rs 8,480.3 crore as compared to Rs 8,348.60 crore to the same period is 2015. It was a mixed performance across segments. Compared to corresponding periods in the previous quarter, home care witnessed a 3.2 percent growth in revenue to Rs 2777 crore from Rs 2690 crore. Personal care saw a marginal decline to Rs 4027.95 crore from Rs 4041.28. Food witnessed 2 percent growth to Rs 277.82 crore from Rs 271 crore and Refreshments saw an 8 percent growth to Rs 1169.17 crore from Rs 1078.93 crore.

Harish Manwani, Chairman, HUL, says, “We remain focused on market development, consumer led innovations and an even sharper drive on operating efficiencies. With a good monsoon, we expect a gradual improvement in market demand and remain positive on the mid-long term outlook for the industry. Our strategic agenda of delivering Consistent, Competitive, Profitable and Responsible growth remains unchanged.”

In the near term, the company expects to see gradual improvement in market growth on the back of a good monsoon and festive season. Sales growth will be positively impacted by recovery in markets. It added that it will continue to focus on volume growth and improvement in operating margin.

HUL continued to innovate on existing brands such as TRESemmé, Lux, Magnum, Kissan and Knorr in this quarter. They have also ventured into the baby care space with Baby Dove. HUL’s natural offerings under brand Indulekha have been launched in four more states, like Gujarat, Delhi and West Bengal in addition to existing markets like Kerala, Tamil Nadu and Maharashtra.

HUL has announced an interim dividend of Rs 7 per share.