HUL posts robust Q2FY12 numbers

Hindustan Unilever posts robust Q2FY12 numbers

India’s No 1 FMCG company, Hindustan Unilever posted robust Q2FY12 numbers, which were above expectations.

Its Net Sales increased by 18% to Rs 5522 cr on YoY basis (less than 10% from volume and rest from price) while Net Profit grew by 21.69% to Rs 688.92 cr.

EBIDTA margin improved 115 basis points to 14.97%. Company declared their result 31^st October 2011 and within two trading session the scrip is up whooping 11.46% at Rs 389.

The robust Q2FY12 results were on the back of new innovations and re-launches. This includes Lux soap, Comfort fabric conditioner, Purit Marvella RO, rebranded Kissan, Knorr soups in sachets of Rs 5 etc.

Soaps and detergent category has been a good performer for FMCG companies. Q2FY12 results of Godrej Consumer Products (GCPL) saw a growth of 32% in this segment. In case of HUL, the soaps & detergent segment was the biggest contributor to the top-line at a growth rate of 22%. But this growth was driven price hikes rather than volume growth.

Personal products, Beverages and Packed food segments also witnessed strong growth. Profit from the export segment grew by 27% to Rs 24 cr.

Management said its water business continues to grow at a good pace, driven by the sales of Pureit Water Purifier. New innovations like Purit Marvella RO are expected to further drive the segment. 

Expenses

Advertising and Promotion expenditure decreased by 200 basis points to 11.81% of the sales on a YoY basis. During the quarter much of the expenses were towards packed foods and Beverages segments. However, the management believes the overall expenditure was in line with industry standards and also expects the same for H2FY12.

The reduction in raw material prices of Palm Oil, Crude Oil and Coffee prices on a year to date basis was countered by a depreciating rupee.

Cost of raw material stood at 41.47% of sales at Rs 2290 cr, which saw an increase of 304 basis points on YoY basis.

The quarter also saw a distribution alliance with Tata Docomo but the management which the management termed as an initiative to better reach the rural areas.

According to the management, headwinds for the company include the rampant inflation affecting raw material prices, a competitive industry and the depreciating rupee. For good news, the company is looking forward to strong consumption demand despite the tightening of money supply, a good monsoon and a strong diversified portfolio of products which helps them to cater to various customers.

We feel the scrip is already trading at its fair price. However there could be investment opportunities in the scrip in case of a correction.

Key Financials of HUL