HUL - Q3 Results Review - Nirmal Bang

The Net Sales grew by 9.9% YoY to Rs. 6,433.7 cr and by 4.5% QoQ. That coupled with a sluggish volume growth of just 5%, compared with 9% a year ago. It was partly due to an adverse SKU mix and indirect price hike impact (to normalise ahead). The soaps & detergent sales grew 20% YoY to Rs 3,171 cr, with double-digit volume growth led by its Surf and Rin brands. Its personal products business saw 13%YoY growth at Rs 2049 cr, with double digit growth in skin care, hair care and oral care. A strong growth in tea helped the beverages business grow 18% YoY to Rs 793 cr but packaged foods only 8% YoY due to lower growth in ice-creams and Knorr.

- EBITDA margins (incl. operating income) were up 30bps YoY, which was disappointing as gross margins declined 40bps YoY due to an adverse category mix (PP vs. S&D). A&P spends were up 100bps YoY on higher media intensity in S&D, which pulled down segmental EBIT margins by 110bps YoY.

- HUL's royalty that it pays to Unilever will increase to 3.15% of turnover by March 2018, compared with 1.4% now. The company said that the royalty will increase in a phased manner, and for Feb 1, 2013-March 31, 2014 it will only be 0.5% higher.

Source : Equity Bulls

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