Hindustan Unilever Q1 PAT seen down 35.4% at Rs 860 cr

Hindustan Unilever will declare its first quarter results today. Analysts on an average expect the largest FMCG company in India to report 35 percent degrowth year-on-year in reported profit after tax at Rs 860 crore, according to a CNBC-TV18 poll.

In a year ago period, the profit after tax had included an one-off financial other income of Rs 120 crore. After adjusting for like-to-like profit, growth is expected to remain flat on a YoY basis. Total income is seen going up by 10 percent from a year ago to Rs 7,025 crore and earnings before interest, tax, depreciation & amortisation (EBITDA) may grow by 11 percent to Rs 1,070 crore in the April-June quarter. HUL's operating profit margin is expected to be flat at 15.2 percent. The result will be closely watched by the street after its parent company Unilever PLC announced results for April-June quarter on Thursday. The stock fell more than 3 percent yesterday  after Unilever flagged off slowing growth in emerging markets. HUL was further down 3.1 percent at Rs 666.35 on NSE in morning trade on Friday. Other companies like Nestle and Coca Cola have talked of emerging markets slowing down. India is the second largest contributior after Brazil in the 67 percent portfolio of Unilever - which comes from emerging markets. In India, "Unilever sees an overall slowdown of the market, as well as the consumer, and in our business to a certain extent," CFO Huet said. However, Unilever has managed to maintain over double digit growth (10-12 percent) from emerging marking countries for 10 straight quarters. According to analysts, the first quarter will see the full impact of royalty increase, lower other income from treasury and a higher tax rate, which will arrest profit growth. They expect HUL to report Q1 volume growth of 5-6 percent (Q4 at 6 percent) on a high base of 9 percent last year. Value growth is likely to be 3-4 percent. Margins HUL is likely to benefit from gross margin expansion (120 bps to 48.4 percent) due to around 30 percent fall in palm oil prices and softening of other important input costs. Gross margin increase will be offset by higher ad-spends during June quarter. Segment performance Growth will be slower because of slowdown in both key segments - soaps & detergents and personal products. Volume growth in discretionary segments in personal care and foods will remain under pressure. Company has been seeing slower premiumization trend. Soaps & detergent margins are expected to taper off from 12 percent level due to aggressive discounts given this quarter. Other important parameters Analysts expect sharp decline in other income (increased 4 times in Q1 FY13) due to lower treasury income owing to reduced cash balance after dividend payout and presence of one-off income tax refunds in the base quarter. Hence, commentary from the management on volume growth and consumer demand environment will be key to watch out for.