HUL Q3 net beats forecast, up 22%; volume growth at 4%

According to CNBC-TV18 poll, analysts had expected the company to report net profit of Rs 939 crore on revenues of Rs 7,116 crore for the quarter.

"During the quarter, the domestic consumer business grew at 10 percent, ahead of market, with 4 percent underlying volume growth," the company said in its filing. Underlying volume growth was expected at around 4-5 percent.

While addressing press conference, HUL clearly said 4-5 percent will be the broad range for volume growth till the macro economic situation revives.

On the operational front, earnings before interest, tax, depreciation and amortisation (EBITDA) grew 12.7 percent to Rs 1,227 crore and operating profit margin expanded 60 basis points to 17 percent compared to same quarter last year. Both were stronger than analysts' expectations of Rs 1,153 crore and 16.2 percent, respectively.

Advertising spends

Advertising spends as a percentage of sales declined to 13.2 percent as against 14.1 percent in previous quarter (due to high investments in oral care), but that was still high. It was 12.2 percent in a year ago period.

Advertising spends rose 13.1 percent year-on-year to Rs 929 crore from Rs 822 crore.

Soaps & Detergents

Revenues from its soaps and detergents business (which includes brands like Dove, Pears, Lifebuoy, Surf, Wheel etc) climbed 7 percent year-on-year to Rs 3,398 crore. This division contributes 50 percent to total revenues.

The company said, "Skin Cleansing delivered another quarter of volume led growth while the liquids portfolio saw accelerated growth led by Lifebuoy Handwash while in Laundry."

"Surf growth was buoyed by the robust performance in Surf Excel Easy Wash and Excel Matic while Rin saw good growth on the bars portfolio. Household care delivered another strong quarter with both Vim and Domex growing in double digits," according to its release.

Earnings before interest and tax jumped 14.55 percent to Rs 451 crore and margin expanded 100 basis points to 13 percent compared to a year ago period.

Personal Products

Revenues from its personal products like Fair & Lovely, Sunsilk, Pepsodent, Dove, Close Up, Elle 18, Lakme etc climbed 12.4 percent to Rs 2,304 crore in the quarter gone by. It was impressive growth from this segment (which contributes 30 percent of total revenues) compared to muted forecast.

Infact it was despite fears of up-stocking and slowdown in discretionary segments, lower premiumisation and stalling of growth in mass-end brands.

Earnings before interest and tax rose 13.9 percent year-on-year to Rs 659.2 crore and margin widened by 100 basis points to 29 percent compared to same quarter last year.

HUL said hair care sustained its strong growth momentum with broad based double digit volume growth while in oral care - both Pepsodent and Close Up delivered stepped up double digit growth in a competitive market.

"Lakme continues to strengthen its position in premium make up driven by a range of exciting and contemporary offerings from Absolute and 9 to 5."

Beverages and Packaged Goods

Beverages segment reported 7 percent growth in revenues at Rs 850 crore, driven by double digit growth in tea.

"Tea delivered another quarter of broad based growth with Taj Mahal, Red Label, 3 Roses and Taaza growing in double digits, driven by a strengthened mix and focused in-market activities," HUL elaborated.

Revenues from packaged goods category grew 13 percent year-on-year to Rs 372.8 crore led by double digit growth in Kissan, Knorr, Kwality Walls products.

Looking forward, Manwani said he is conscious of the uncertain macro context but remains positive on the mid to long term opportunities in the sector. "We are determined to stay the course on our strategy and will continue to invest in the business for the long term," he added.