HUL volume growth surprises, profit before tax up 14% in December quarter

The company's volume growth is also ahead of the overall FMCG sector's

The country's largest consumer goods company, Hindustan Unilever (HUL), on Friday reported a volume growth of 5 per cent in the third quarter, ahead of analysts' estimates of 3-4 per cent.

This came in a challenging market environment, according to HUL’s chairman and managing director Sanjiv Mehta (pictured).

This is the fourth straight quarter of single-digit volume growth for HUL. Of the four quarters, three quarters in a row have seen HUL deliver volume growth at 5 per cent, Abneesh Roy, executive vice-president, research (institutional equities), Edelweiss, said.

HUL's Q3 volume growth is also ahead of the overall fast moving consumer goods (FMCG) sector's volume growth of 3 per cent for the three months ended December 31 2019, experts said, implying the firm was committed to driving sales volumes despite weak market conditions.

The company did this by cutting soap prices, driving low unit packs across categories and pushing penetration of its products using its ‘Winning in Many Indias’ strategy, Mehta said.

While HUL’s profit before tax (PBT) grew 14.3 per cent to Rs 2,229 crore, its net profit grew nearly 12 per cent Rs 1,616 crore year-on-year.

A consensus estimate of analysts by Bloomberg had pegged net profit at Rs 1,596 crore for the period.

Revenue (which includes net sales plus other operating income) rose 2.6 per cent to Rs 9,808 crore in the December quarter. Analysts had estimated Rs 10,034 crore, according to Bloomberg.

Earnings before interest tax depreciation and amortisation (Ebitda) rose 19 per cent to Rs 2,445 crore—higher than analysts’ estimates of Rs 2,241 crore.

Ebitda margin expanded to 24.9 per cent from 21.4 per cent, higher than the consensus projection of 22.3 per cent.

“The demand outlook remains challenging in the short-term,” Mehta said, adding that he saw medium-to-long-term prospects for the domestic FMCG market improving. “I remain hopeful that policy measures will spur demand and drive consumption,” he said, as attention shifts to the Union Budget to be announced on Saturday.

Market research agency Nielsen has said a recovery in the FMCG market is likely in the January-March 2020 period, and is expected to gain pace in the subsequent quarters.