Home Market HUL posts double-digit sales growth in Q1 on rural demand

HUL posts double-digit sales growth in Q1 on rural demand

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MUMBAI: Hindustan Unilever (HUL), Indias biggest pure-play consumer company by market value, reported its third consecutive double-digit sales volume growth in the June quarter, pointing to a gradual revival of demand in Asias third-biggest economy that has witnessed major structural reforms since late 2016.

The local unit of the Anglo-Dutch major, long considered a good proxy for gauging consumer sentiment across the countrys socio-economic spectrum, said it cant draw a clear demand trend yet due to volatility in the base quarters. The November 2016 demonetisation and mid-2017 rollout of the single producer levy (GST) had upended consumption and stocking patterns in Indias consumer industry, making it difficult for executives to establish clear trend lines.

“We should wait for a few quarters before we can decipher the trend that is emerging because the base lines were impacted first by demonetisation and then by GST,” HUL chairman and managing director Sanjiv Mehta said after the earnings were announced. “If we look at the last 12 weeks, then volumes for the overall market are in the vicinity of 5-5.5 per cent and Nielsen reported growth is 6-6.5 per cent. We believe it has bottomed out, but the question is when will it be back to the full potential that exists in our countryRs "

To be sure, HUL said net sales are not comparable as turnover in the latest quarter was calculated net of GST: Earlier, it was gross of excise, which in turn was baked into the costs. As a result, HUL reported sales rose marginally by 3 per cent to Rs 9,356 crore from Rs 9,094 crore in the yearago period, which the company attributed to an “accounting impact.”

In reality, net sales rose 16 per cent on a comparable basis after including net excise duty, fiscal exemption or refund and net input taxes. Even in margins, the company reported a 350 bps margin expansion but on a comparable basis, the increase was 100 bps. A basis point is 0.01 percentage point. Profit before exceptional items increased 21 per cent to Rs 1,567 crore at the Indian unit of Unilever.

In the past few years, drought and lower minimum support prices for farm produce had hit rural demand. The company, however, said the situation seems to be improving. “The good news is that rural growth has started to bounce back, not as much as in some of the great historical years, but it is certainly growing higher than urban,” added Mehta.

The maker of Rin detergents and Lux soap saw volume growth of 12 per cent in the June quarter, marginally higher than the last two consecutive three-month periods in which expansion was 11 per cent. Volume indicates the actual number of products customers were putting in their shopping carts.

“With rural consumption improving, we expect the strong volume growth momentum to sustain…Volatility in input prices needs to be monitored in coming quarters,” said Kaustubh Pawaskar, senior research analyst, Sharekhan.

HULs personal care business, which accounts for about half of its overall sales, rose 1 per cent to Rs 4,096 crore, while the home care segment expanded 4 per cent to Rs 3,102 crore.

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