After posting zero domestic consumer sales growth (year-on-year) in the December 2016 quarter due to the impact of demonetisation, Hindustan Unilever has been recording an uptick in every quarter since then.

Domestic consumer sales inched up by 8, 5 and 10 per cent in the March , June and September 2017 quarters, respectively. In the December quarter, the company clocked a 17 per cent gain in domestic consumer sales.

This growth has been backed by a strong 11 per cent rise in volumes, which had the advantage of a low base (4 per cent fall in volumes) in the December 2016 quarter.

Margins expand

Growth in the latest quarter has been broad-based, with all major segments – home care, personal care, refreshment and foods showing double-digit gains.

During the quarter, the company witnessed cost pressures from rise in prices of various inputs. Raw material cost as a percentage of sales came in at 47.5 per cent against 44.3 per cent recorded a year ago.

The company also stepped up its advertising spends. At 13.3 per cent of sales in the latest quarter, advertising and promotion expenses increased by 240 basis points over the December 2016 quarter.

Yet, cost control efforts helped in margin expansion. It came in at 19.5 per cent, about a percentage point higher than a year ago.

However , after accounting for exceptional items such as restructuring expenses and profit on sale of surplus properties in both the quarters, profit growth came in at a lower 9.6 per cent.

In the quarters to come, the company will gain from stepping up its naturals/ayurvedic portfolio.With the company deriving almost half its revenues from the rural areas, expected budget measures to boost rural India will lift volumes further.

Related Topics
comment COMMENT NOW