Analyst Meet / AGM     18-Jan-18
Conference Call
Hindustan Uniliver
Actual margin improvement due to core operating reasons would have been 110 bps instead of reported 350 bps improvement
The company held its conference call on 17 Jan 2018 and was addressed by key management

Key Highlights

Dec 17 quarter saw trade conditions getting normalized post GST implementation. Gradual improvement in demand seen across the product categories post successful implementation of GST

Strong volume led growth of 11% in Dec 17 quarter on YoY basis; however Dec 16 quarter was impacted by demonetisation and had low base. Ad and promotion spends were higher in Dec 17 quarter which helped in higher sales.

Growth was seen across the categories. For Dec 17 quarter, Home care grew by 20% on YoY basis, personal care segment by 17% YoY and Foods by 18%.

In home care segment, the growth was led by strong performance of Vim. Within Air purifier category, Pureit launched many new brands.

In Personal care segment, Dove and Pears led the growth. Fair & Lovely and Hair Care segment both saw a double digit volume growth.

In Foods segment, both Knorr and Kissan brands has seen a broad based growth.

Margins for Dec 17 quarter was higher due to tight cost control and internal savings. Raw material cost didn't have any major impact in this quarter. However going forward, rising input cost is a worry and the company has to take adequate cost adjustments including ad spends to mitigate it in future. Further post GST, the benefits of refund of excise duty and indirect tax fiscal exemption gets reported in other operating income which resulted in lower revenues but higher Ebidta margin. No major impact in absolute Ebidta.

The company booked the excise refunds from July to Dec 17 periods in Dec 17 quarter, so some margin benefit was one time.

Actual margin improvement due to core operating reasons would have been 110 bps instead of reported 350 bps improvements which included GST and other subjects.

The company had made price reductions on all its product categories that saw the GST rates going down from 28% to 18% in mid Nov 17. Entire benefit of rate reduction in GST has been passed on to the customers.

Significant part of network was covered by end of Dec 17 with new product price, packaging etc.

Due to paucity of time, entire benefit of the 15th November GST rate reductions on some of the pipeline stocks could not be passed on to the end consumers. The company had received Rs 119 crore in total of the duty difference rate post new GST, which is kept under consumer welfare fund and is not booked as part of operations.

The other income in Dec 17 quarter was higher due to higher dividend income from subsidiary in this quarter as compared to last quarter.

Tax rate was lower in Dec 17 quarter due to tax reversals of previous period.

Looking ahead, while the management is confident of a gradual improvement in demand to sustain its still too early to confirm on the definite trend.

Further the raw material price increase will continue to worry going forward. The focus of the company will be on volume driven growth and to improve operating profits

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