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Following the strong show put up by Marico and Godrej Consumer in the quarter ended March 2017, Hindustan Unilever (HUL) too, reported good numbers. Like these peers, the company has shrugged off the effect of demonetisation with aplomb, reporting a domestic consumer sales growth of 8 per cent in the March 2017 quarter, over the year-ago period. Domestic consumer sales growth was at zero per cent in the December 2016 quarter (over December 2015 quarter).
With premium products such as Surf and Vim liquid (homecare), Pears and Dove (personal care) and Bru Gold (refreshments) driving growth, the trend of urban consumption bettering rural, seen in Marico and Godrej Consumer, is visible in the results of HUL as well. The company also benefited from the relaunch of products such as Fair & Lovely and Close up during the quarter.
HUL reported sales growth of 7.1 per cent year-on-year (including exports) to ₹8,773 crore, supported almost equally by both volumes as well as realisations. The home and personal care segments, which bring about 80 per cent of the company’s revenues, witnessed sales growth of 7-8 per cent each over the year-ago period. In the December 2016 quarter, homecare revenues grew by 1 per cent, while that of personal care dropped by 3 per cent.
Thanks to stable input costs for the company, raw material as a percentage of sales stood almost flat at 46.6 per cent in March 2017 quarter. But robust margin expansion in the homecare segment coupled with savings in employee and advertising and promotion costs helped operating margins. Margins expanded by about 190 basis points in the homecare segment, thanks to strong growth in both Surf and Vim Liquid. Advertisement and promotion expenses as a percentage of sales came down to 9.7 per cent compared with 10.5 per cent a year ago. Employee expenses dropped by 12 per cent. These factors helped operating margins for the company as a whole expand to 19.5 per cent, compared with 18.8 per cent in the March 2016 quarter. Adjusted net profit grew by 11 per cent to ₹1,184 crore.
In the months to come, premium products are expected to continue to do well, thanks to the strengthening urban demand. Besides, raw material costs are expected to remain stable, giving the company enough room to push for further volumes, especially in the rural markets.
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