HLL sees 1st margin expansion, after 4-yrs margin decline

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Hindustan Lever , HLL has come out with fourth quarter as well as CY06 numbers. The results was above the markets expectations. Margins has increased by 60 bps, which was tad lower than expectations.

Its net sales was up 9% at Rs 12103.39 crore (Rs 121.03 billion) versus Rs 11060.6 crore (Rs 110.60 billion). (CNBC-TV18 Poll: Rs 12,215.7 crore)

The net profit surged by 32% to Rs 1855.37 crore (Rs 18.55 billion) as compared to Rs 1408.1 crore (Rs 14.08 billion). (CNBC-TV18 Poll: Rs 1,580 crore)

The OPM reported at 13.6% versus 13% while analysts expected 14% for this year.

CY06 EPS improved to Rs 8.4 as against Rs 7.3.

HLL's numbers are not comparable due to hive off plantation business.

For the Q4CY06; the company posted net sales of Rs 3156.10 crore (Rs 31.56 billion) versus Rs 2974.3 crore (Rs 29.74 billion), up by 6.1%. (CNBC-TV18 Poll: Rs 3328.9 crore)

The net profit jumped by 1.9% to Rs 511.18 crore (Rs 5.11 billion) as against Rs 520.9 crore (Rs 5.20 billion). (CNBC-TV18 Poll: Rs 485.8 crore)

Its OPM stood at 15.8% versus 16.2%. (CNBC-TV18 Poll: 16.9%)

Its net profit before extraorindaries was up 10.2% to Rs 483.43 crore (Rs 4.83 billion) from Rs 438.50 crore (Rs 4.38 billion). (CNBC-TV18 Poll: Rs 485.8 crore)

Q4 Highlights

• 8.5% FMCG 4.25% volume growth and 4.25% value growth
• See same trend in CY07
• Exceptional item of Rs 27 crore from actuarial credit from revaluations and profit on sale of Indigo shared services with Cap Gemini

Revenue growth
Segment        Volume growth PBIT margin growth
Soaps &
Detergents            10.1%             Down 10 bps
Personal products  2.5%              up 30 bps
Beverages             8.3%              down 30 bps
Processed foods    18.1%             up 10%
Ice creams            23.3%            up 17.6%
Exports                 down 2.3%      down 10 bps

HLL - Margins Over the Past Few Quarters

Quarter Margin

• Q1CY05 9.7%
• Q2CY05 12.2%
• Q3CY05 12.6%
• Q4CY05 16.2%
• Q1CY06 11.18%
• Q2CY06 13.4%
• Q3CY06 13.1%
• Q4CY06 15.8% Vs expectations of 16.9%

HLL : Sees First margin expansion, After four years of margin decline

• CY02: 19.6%
• CY03: 19.2%
• CY04: 14.5%
• CY05: 13%
• CY06: 13.7%