HUL

Hindustan Unilever (HUL) was a big loser yesterday as concerns mount over the payment of royalty rose. This fear emerged after news came in that its Indonesian subsidiary had agreed to pay higher royalty to the parent company, Unilever. According to the agreement, beginning 2013, Unilever Indonesia will pay 5% royalty on sales, up from the current 3%. And it is now widely expected that in Indian too, where Unilever a 51% stake in HUL will end up paying higher royalty. Presently, HUL pays 1.5% royalty on sales and this is expected to double to 3% and though this is much lower than the payments made by P&G and Colgate, the market is nevertheless worried. In FY12, the company has paid Rs.307 crore as royalty on a net sales of Rs.23,436 crore but this as a percentage of the net profit works out much higher, at around 11%. Yet, that is also one of the lowest in the entire MNC FMCG sector who payout royalty. The highest is Colgate, which had paid 31.57% of the net profit for last fiscal. As such, the company is on a sound

On the financial front, the MNC FMCG company did very well for Q2FY12. The company had an exceptional income of Rs.44.42 crore and on that, it posted a net profit at Rs.689 crore. And in the current Q2, the exceptional income was just at Rs.1.58 crore, based purely on strong operational efficiencies; it posted a net profit at Rs.807 crore, up 17% on a YoY. And this was despite a 17.5% rise in raw material costs and 18% increase in advertising costs too.  The 12% increase in topline at Rs.6155 crore helped the overall performance.  Domestic Consumer business sustained its robust performance growing at 16% with underlying volume growth of 7%. The numbers would have been much better but for the overall growth in the quarter was impacted by the budget rationalization in the Canteen Stores Department (CSD). Personal Products grew 12%, Beverages grew 10%, Packaged Foods grew 10%. The good news is that that company has declared a Special Dividend of Rs.8 per share (Face Value of Re. 1 each) to be paid to its shareholders on record date as of 2-Nov-2012. The dividend will be paid to shareholders on or after 16-Nov-2012. The payment of Special Dividend will be made in addition to the Interim Dividend of Rs 4.5 per share for the year ending 31st March 2013. The company’s net profit for H1FY13 was at Rs.2138 crore v/s Rs.2691 crore for 12MFY12. Clearly, with two more quarters to go, it will end the current fiscal on a much higher note despite the hike in royalty!