Hindustan Unilever delivers yet another solid performance, net profit up 17%

Moneylife Digital Team 26 October 2012

The fast moving consumer goods company has shown that consumer spending is resilient despite a challenging environment

Hindustan Unilever (HUL), one of the biggest fast moving consumer goods company in the country, has posted yet another solid quarter. Its sales grew by 12% year-on-year (y-o-y). It recorded Rs6310.81 crore net sales for the quarter ended 30 September 2012, when compared to Rs5610.48 crore for the same period a year ago. The exceptional sales were driven by strong growth in the domestic consumer business segment, which grew double digits. Its net profit grew 17% to Rs806.92 crore. This shows that consumer spending isn’t getting majorly affected by inflation.

The Moneylife database showed that HUL’s sales growth has been rock steady over the last eight quarters and not growing slower than 12% y-o-y, which is impressive considering many investors nearly wrote the company off after many years of single digit growth. However, operating profit growth rate has slowed down considerably this quarter, but still quite impressive growing at 18% y-o-y, short of its three-quarter y-o-y average of 26%. This was mainly because the company’s aadvertising and promotion was stepped up by Rs118 crore in the quarter, in a bid to boost visibility of its brands. The impressive performance of the last few years is the reason behind its astoundingly high return on equity, which stood at a whopping 102%. This is also another reason why its valuation is commanding premium numbers, with its market capitalization over 31 times its operating profit.

Harish Manwani, chairman of HUL commented “In a volatile and uncertain environment, we continue to sustain our growth momentum while steadily improving our margins. Our consistent performance is being driven by a relentless focus on brand building, bigger and better innovations and disciplined execution in the marketplace.”

During the quarter, the domestic consumer business sustained its robust performance growing at 16% with underlying volume growth of 7%. Overall growth in the quarter was impacted by the budget rationalization in the Canteen Stores Department (CSD). Soaps & detergents grew 22%; double digit growth across all segments. Personal products grew 12%; growth stepped up in hair & oral. Oral care registered volume led double digit growth with Close Up buoyed by its re-launch in the quarter and Pepsodent driven by the premium range. Beverages grew 10%; led by premium products such as Bru. Packaged foods grew 10%; driven by key brands such as Knorr and Kissan.

Despite a solid showing, the stock price dipped 2.14% to end the day at Rs551.75 on the Bombay Stock Exchange (BSE).

Comments