HUL

The much anticipated numbers from HUL were out and it did not disappoint. A volume growth of 5% v/s 9% on YoY and lower than expected 16% rise in net profit at Rs.871 crore disappointed the markets. This profit rise was on a 12% YoY increase in net sales at Rs.6,655 crore. More than the numbers, the market is spooked by the new royalty pact signed by the company with its parent company, Unilever Plc, wherein the royalty paid will go up from  1.4% of the revenue it has been paying till now to 3.15% it will pay henceforth, till March 2018. The royalty will increase in a phased manner and for the period from Feb 1, 2013 to March 31, 2014 it will pay 0.5% higher or 1.9%. This increased royalty outgo is expected to hit margins which as such has been stagnating.

In the quarter, the company also had an exceptional loss of Rs.7 crore which was on account of profit of Rs.25 crore on sale of properties and Rs.32 crore incurred on restructuring costs. In terms of segment revenue, its flagship brand- Surf continues to do well and along with Rin, it grew 20%. Personal care products grew 13% while tea helped the beverage segment grew 18%. Packaged foods grew 7.5%. Water, chemicals etc, clubbed under ‘other business’ fell 43%. Despite the market disappointment, things are good for the company in the coming months as rabi crop harvest is expected to be good and this would mean more demand for FMCG products and HUL will be a big beneficiary.