Consumer Goods Firms, HUL and Others Post Poor Q2 Results

Hindustan Unilever (HUL) and other packaged

consumer goods firms posted subdued
consumer demand in the fiscal Q2 even as they
said that they expect a revival in demand in the
latter half of the year after a normal monsoon
brought relief to drought-hit farmers after 2
years. The companies are confident that the
worst is over as far as demand is concerned,
even though increasing raw material prices
present a challenge and are looking to hit
profitability.
An analyst said that the rural sector was very significant to consumer firms and so far there
had been no pickup in demand. Given the good monsoon, he added, and the money from
the 7th pay commission and OROP one rank, one pension for army pensioners coming in
he was hoping that the worst is over and the latter half would be better than the first half.
The September quarter (Q2) has been dismal in terms of volume growth. HUL, posted a 1
per cent decline in sales volume growth, the first in thirty quarters, as price hikes,
prompted by a rise in raw material costs, depressed demand further. Net profit grew 11.54
per cent to Rs 1,095.60 cr in the quarter ended 30 September from Rs 982.17 cr a year ago,
the company said on Wednesday. Revenue rose 1.6 per cent to Rs 8,480.3 cr.
Meanwhile, HUL share price closed at Rs.840.30 on the NSE today.
The Indian unit of Unilever lagged overall growth in the consumer packaged goods market
in Q2. HUL reported a 3 per cent increase in sales value growth due to price increases it
effected. HUL is hopeful that demand, particularly in rural areas, shall pick up soon.
Dabur India and ITC also announced their Q2 earnings on Wednesday. ITC said that
quarterly profit rose 10.5 per cent from a year earlier to Rs 2,500 cr, largely on account of
a rise in operating profit from its cigarette business.
However, revenue growth was muted and behind analyst expectations at 7.8 per cent. The
company said that it continued to battle persistently sluggish demand environment. ITC
posted Rs 13,491.37 cr in revenue from operations as against Rs 12,511.76 cr in the same

period last year. The revenue from non-cigarette consumer goods segment grew 13.3 per
cent over last year to Rs 2,671.66 cr.
Dabur Indias Q2 profit rose 5 per cent to Rs357.3 cr from Rs 340.2 cr a year earlier. The
revenue grew at a poor 1 per cent to Rs 1,975.7 cr from Rs 1,955.3 cr in the year earlier.
Not everyone is buying the Theory of a better Second Half:
An analyst said that for consumer companies, gross margins would not sustain as raw
material costs were going up and volume growth would not pick up substantially in the
future quarters. He added that there would be a pain of 3-4 quarters for most of the
consumer companies and earning estimates would be revised downwards. Also, he added
that it would be the first quarter of financial year 2018 when one would witness volume
growth return.

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Article Written by
Salman Hashmi