HUL, Dabur & Colgate Q1 sales up 20%, next few Qs challenging

25 Jul,2012

By A Correspondent


Consumer goods companies Hindustan Unilever, Colgate-Palmolive and Dabur said the next few quarters could be challenging if the monsoon is weak and the rupee continues to fall after reporting about 20 per cent jump in their first quarter sales.


Hindustan Unilever, the country’s largest consumer goods company, whose presence in a range of daily consumption items such as soaps, shampoos and food makes its performance a good proxy for consumer sentiment, said it has not seen any evidence yet of customers trading down for cheaper products but delayed monsoon, weak rupee and volatile raw-material prices remain a concern.


“When we look into the medium term, we believe that the growth drivers for FMCG are really positive,” said R Sridhar, chief financial officer at Hindustan Unilever. “But when we look at the next 2-3 quarters, clearly there are few challenges-the final shape of how monsoon distribution happens, rupee has depreciated quite significantly and inflation continues to be at a very high level,” he said.


Dabur CEO Sunil Duggal too said: “As of now, we have not witnessed any slowdown in rural consumption, but there could be some amount of demand contraction this (July-September) quarter.”


HUL’s total income rose 20 per cent to Rs6,378.7 crore in the April-June quarter from Rs5,323.6 crore in the year-ago period, outperforming the broader FMCG industry that grew 16 per cent during the quarter. Profit after tax before exceptional items at the Indian unit of Anglo-Dutch Unilever rose 48 per cent to Rs855 crore in the three months to June. Exceptional items included sale of properties worth Rs607 crore.


The company said it was able to increase its operating profit margins by 180 basis points. Its cost of goods sold during the period was 200 basis points lower than in the year-ago period.


During the quarter, HUL’s sales of soaps and detergents-its largest business segment-rose 24 per cent to Rs3,163.05 crore, helped mainly by price increases. Double-digit volume growth drove up sales of personal care products by 17per cent  to Rs1,847.08 crore, while beverages sales were 7per cent  higher at Rs654.07 crore. New launches in brands such as Kwality Walls helped its packaged foods business grow 17 per cent to Rs436.98 crore.


What pleased analysts the most about the results was the companies’ sustainable volume growth. HUL, Dabur and Colgate-Palmolive grew their volumes between 9-12 per cent as the makers of daily household products sold more goods despite increasing prices. “Across companies, margins have expanded and ad spends increased too. With sales of premium products growing, there isn’t even first signs of slowdown yet,” said Anand Mour of Ambit Capital. Colgate-Palmolive reported a 17 per cent jump in first quarter profit at Rs117 crore, while its sales grew 20 per cent at Rs736 crore. “In an inflationary environment, the company’s continuing efforts and focussed programs to enhance efficiencies and reduce costs continue to yield strong, positive results, helping to maintain margin and fund investments in building and strengthening brand equity and the business,” Colgate said in a statement. The company said prudent price increases and cost management helped it maintain its strong gross margin.


Dabur reported 21 per cent jump in April-June sales at Rs1,461.9 crore, while net profit increased 17 per cent year-on-year to Rs149.4 crore, riding on categories like health supplements, shampoos and food. Faster network expansion in rural markets too helped the firm drive sales. Dabur CEO Duggal said the company was forecasting double-digit growth over the next two quarters although there could be some slowdown in demand.


Source: The Economic Times

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