HUL Chairman and Managing Director Sanjiv Mehta admitted that not only rural growth, urban growth too was slowing.
Hindustan Unilever (HUL), the country’s largest consumer goods company, on Tuesday reported its lowest volume growth in seven quarters for the April-June period (Q1FY20) on the back of moderation in consumer demand.
For the quarter under review, HUL saw 5 per cent volume growth as against 12 per cent in the year-ago period. This is the second straight quarter when HUL has posted single-digit volume growth. In the March quarter, volume growth was 7 per cent.
HUL Chairman and Managing Director Sanjiv Mehta admitted that not only rural growth, urban growth too was slowing. However, the slowdown in rural growth, he said, was sharper than the moderation seen in urban growth. “While rural growth earlier was ahead of urban growth by 1.3 times, it is now on a par with urban growth,” he said in a post-results press conference.
Last week, market research agency Nielsen had alluded to this, saying subdued growth in rural markets in Q1 contributed 57 per cent to the slowdown.
HUL’s net profit rose 15 per cent year-on-year to Rs 1,755 crore in Q1, in line with the Rs 1,716-crore consensus estimate of analysts tracked by Bloomberg. Revenue (net sales plus other operating income) rose 6.6 per cent over last year to Rs 10,114 crore, in line with the Rs 10,171-crore estimate.
HUL volume growth slowest in 7 quarters; Q1 profit in line with estimates
Operating income, or earnings before interest, tax, depreciation and amortisation (Ebitda), rose 17.6 per cent year-on-year to Rs 2,647 crore.
This is also in line with the consensus estimate of Rs 2,474 crore. Its operating or Ebitda margin expanded 250 basis points to 26.2 per cent in the three months to June. Both Ebitda and Ebitda margins include the IndAS116 impact on lease accounting, which came into effect in Q1.
Excluding the impact, Ebitda impact margins expanded by 150 basis points on a like-to-like basis, HUL’s management said.
One basis point is equal to one-hundredth of a percentage point.
“HUL’s performance was largely in line with our expectations. Margin expansion should sustain in the future on the back of operating efficiencies,” said Kaustubh Pawaskar, research analyst at brokerage Sharekhan.
Shares of HUL closed 0.86 per cent higher on the BSE, ahead of the earnings announcement on Tuesday, at Rs 1693.20.