HUL's Q1 revenues miss estimates on rural headwinds

At 4 percent, volume growth was flat compared with the previous quarter; net profit rose 10 percent YoY to Rs 1,174 crore

Salil Panchal
Published: Jul 18, 2016 06:02:43 PM IST
Updated: Jul 18, 2016 07:40:49 PM IST

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

HUL's Q1 revenues miss estimates on rural headwinds
Image: Danish Siddiqui / Reuters

India’s largest consumer goods company Hindustan Unilever Ltd (HUL) reported weak earnings growth for the three months ended June 30, 2016 as rural demand, the firm’s main engine of growth, has still to pick up in a major way.

Volume growth was flat compared with the previous quarter and revenues, too, came in below street expectations.

For the first quarter of FY17, HUL—the maker of Dove soap and Sunsilk shampoo—posted a 4 percent volume growth, the same as that posted in the January-March quarter of FY16.

Net sales came in at Rs 7,988 crore, up 3.6 percent from Rs 7,713 crore in the corresponding quarter a year earlier. Analysts had forecast the company to clock sales of Rs 8,550 crore on volume growth of 4.5 to 5.5 percent. HUL’s net profit for the quarter rose 9.8 percent year-on-year to Rs 1,174 crore, against expectations of Rs 1,156 crore.

The company’s stock ended the day down 2.04 percent at Rs 920.45 on BSE.
“During the quarter, against the backdrop of a challenging environment, where market growth slowed further in volume and value terms, the business continued to track ahead of the market with sustained margin improvement. Consumer business growth came in at four percent and operating margins expanded by 70 basis points,” the company said in a statement to the stock exchanges.

In the previous fiscal, HUL, like its peers, had lowered prices for key products including soaps, detergents and shampoos, to gain market share at a time when two consecutive years of poor monsoons had hurt farm output and rural spending. A normal monsoon this year is expected to provide a boost to rural consumption, but a clear turnaround is yet to emerge.

The FMCG giant plans to invest Rs 1,000 crore in a new manufacturing plant within its existing factory at Doom Dooma in Assam.

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