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| Edited By: Shailaja Sharma |Source: DNA |Updated: Mar 18, 2018, 02:51 AM IST
Hindustan Unilever Ltd (HUL), the Indian unit of Anglo-Dutch consumer goods giant Unilever Plc, posted fourth-quarter profit that beat estimates as strong volume growth more than offset rising input costs. However, input cost inflation continued to remain high and volatile driven by crude and palm oil — the two key raw materials for the company, Hindustan Unilever said.
The company’s volume growth in FY11 was 13% — highest in more than a decade — according to its chief executive officer Nitin Paranjpe. Unilever chief Paul Polman had recently expressed his desire to double HUL’s turnover in a decade.
For the quarter ended March 31, the company reported a 13.5% growth in net sales at Rs4899.35 crore, led entirely by volume growth in domestic business, beating analysts’ estimates of 9-10% revenue growth. Net profit for the quarter, however, saw a 2% decline year on year at Rs569.15 crore due to higher raw material costs.
Analysts, on average, expected net profit of Rs450 crore on net sales of Rs4870 crore, according to Thomson Reuters IBES.
Paranjpe said that the high inflationary and volatile trend in raw materials is likely to continue. “However, some respite has started in palm oil.”
Cost of goods sold went up by 290 basis points during the quarter.
Analysts covering the company said that soaps and detergents segment could pose pressure on company’s volume and margin fronts in the coming quarter.
Kaustubh Pawaskar, FMCG analyst at Sharekhan, said that maintaining profitability (on account of rising commodity costs) and competitive ad spends would be challenges for HUL.
Going forward, Paranjpe said, the mix between volume and pricing could undergo a change.
“We are beginning to see price growth coming into the equation where mix between volume and price has undergone a change, and there could be tempering of some volume and little more price is likely to happen as you move forward.”
Growth in soaps and detergents business — where the company makes the bulk of its sales - was 11.4% during the quarter.
Detergent brands Surf, Rin and Wheel all showed double digit volume growth with Rin crossing the Rs1, 000 crore turnover mark in FY11. Personal products business grew 16.2% driven by several new launches. Foods business, where the company launched variants in beverages and forayed into newer categories like juices, malted drinks and cream spread — all under the Kissan brand — grew by 15.4%.
Paranjpe said that HUL had planned to treble its direct coverage of outlets in rural markets by adding 5,00,000 new outelts to its network in two years, but has managed to achieve the target just in a year.
HUL has done an incremental business of Rs1, 800 crore in FY11 — Rs300 crore in first quarter, Rs400 crore in second, and Rs500 crore and Rs600 crore in third and fourth quarter, respectively.
The company made innovations across more than 50% of its business during the fiscal. In the fourth quarter, HUL forayed into café chain business and opened six Bru World Cafes, which it is aggressively going to expand.
To take its brands to the Indian diaspora, the company is planning to restructure its exports business by de-merging it into its wholly owned subsidiary Unilever India Exports Ltd.
The company has been exporting brands like Pears soap, Fair & Lovely creams and its tea and coffee products to Gulf countries and pockets in the UK, the US and Africa to cater to the Indian diaspora. It is currently evaluating other iconic brands in the HUL stable that it can export to these markets.
