FMCG major Hindustan Unilever (HUL) will declare its third quarter (October-December) earnings today. According to CNBC-TV18 poll, analysts on an average expect a weak quarter for the company.
They believe challenging demand conditions and weak discretionary spends should keep volume growth soft at 4-5 percent. It had maintained average volume growth rate of 5 percent for the past four quarters.
Reported profit after tax of the company is expected to grow 7.8 percent year-on-year to Rs 939 crore and net sales may surge 10.6 percent to Rs 7,116 crore in the quarter ended December 2013.
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During October-December quarter, earnings before interest, tax, depreciation and amortisation (including other operating income) is likely to rise 5.9 percent to Rs 1,153 crore while operating profit margin may decline 20 basis points to 16.2 percent compared to a year ago period.
Analysts believe the margin will see full impact of rupee depreciation on company’s portfolio. The impact will be on account of rise in input costs (high density polyethylene up 18 percent, palm oil up 4 percent, and liquid paraffin up 17 percent Y-o-Y) along with high advertising spends.
According to poll, the impact of price increases in December to counter inflationary pressures should come into full play in January-March quarter of current financial year 2013-14.
Despite unfavourable rupee, better product mix towards winter-based high-margin personal products should keep overall margin rangebound.
High advertising and promotion spends should keep margin under check. In the second quarter, advertising spends were the highest in past 12 quarters and that is unlikely to come off in Q3, analysts feel.
Soaps and detergents
In the last one-year, soaps have been the key volume driver for HUL with the segment recording consistent double digit volume growth. With overall category growth moderating, volume growth in soaps and detergents has declined.
Analysts expect sales growth to moderate at high single digits, adding that is not likely to be entirely volume driven as it has been the case for the last couple of quarters.
Margin is expected to be lower sequentially due to unfavourable rupee, although Y-o-Y number will look healthy on a low base of last year.
Personal products
Delayed winter and up-stocking in Q2 for the festive season will impact personal products growth, particularly skin care, in Q3.
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