HUL: Q4FY14 Result Analysis

FMCG major Hindustan Unilever, came out with its fourth quarter FY14 results that was in line with the market expectation. The topline stood at Rs 6935.82 crore as against Rs 6367.14 crore witnessing growth of 8.93%. It posted a net profit of Rs 872 crore as against Rs 787.2 crore in the corresponding quarter last fiscal witnessing a gain of 10.79%. The growth of 9% witnessed in the domestic consumer business is ahead of the market and the underlying volume growth for the said period stood at 3%.

On operational front, the performance of the company has been somewhat on the better side. The EBITDA of the company stood at Rs 1077.55 crore for Q4FY14 as against Rs 971.77 crore reported during the same quarter last fiscal witnessing a growth of 11 per cent. The EBITDA margins of the company came in higher by 27 basis points on YoY basis. However, the raw material prices on YoY basis grew by 224 basis points to stand at Rs 2910 crore witnessing an increase of 15 per cent. The company in this quarter had been conservative as they reduced their advertisement spends by 78 basis points to stand at Rs 840.34 crore.

On the segmental front, the soaps & detergents segment witnessed healthy performance. Skin Cleansing delivered double digit growth, aided by a step up in price growth as judicious pricing actions were taken to manage input cost inflation. In laundry, growth was led by the premium segment with Surf maintaining its double digit growth momentum and Rin delivering good growth on the bars portfolio. Wheel growth stepped up on the back of its re-launch in the last quarter. Comfort fabric conditioners continue to lead market development with sustained high growth. Vim led the performance in Household Care.

On the personal products, Skin Care grew well in a soft market. The re-launch of Fair & Lovely, with the new ‘Best Ever Formula’ and supported by a focused activation plan, is yielding positive results. Hair Care sustained volume led double digit growth with Dove delivering another strong performance and Clinic Plus doing well. TRESemmé, which saw the addition of a new Split Remedy variant, continued to make very good progress.

In Oral Care, significant investments were made to sustain our competitiveness in the category. While Close Up grew in the quarter, Pepsodent was impacted by the high promotional intensity in the market. Actions are underway to step up performance.

Tea sustained double digit growth on the back of stepped up volumes. Taj Mahal, Red Label and 3 Roses grew in double digits, driven by a strengthened mix and focused in-market activities. The thrust on leading market development for tea bags saw flavoured and green tea bags more than double sales in the quarter. In Coffee, Bru Gold continued to perform well.

Kissan registered another robust quarter with growth accelerating on both Ketchups and Jams, driven by impactful activation while Knorr growth continued to be led by Instant Soups which more than doubled volumes. Ice Creams saw strong growth arising from the selling in of Magnum which was extended to 4 other cities, and sharper in-market execution on Kwality Walls, ahead of the season.

The company has declared final dividend of Rs 7.50 which takes the total dividend payment for the fiscal to Rs 13. We suggest our readers to hold on to the stock for better returns going forward.