Leading fast moving consumer goods (FMCG) player Hindustan Unilever (HUL), reported a 13.9 per cent year-on-year jump in its consolidated net profit for April-June quarter. Its profit after tax surged to Rs 2,391 crore from Rs 2,100 crore in the corresponding quarter previous year.

The firm’s consolidated net sales grew by 19.5 per cent over last year to Rs 14,331 crore, up from Rs 11,996 crore, backed by better sales in its home care business. Its revenue from home care segment that includes its market leading detergents portfolio, grew 30 per cent to Rs 4,930 crore, up from Rs 3,797 crore. Overall, the company said that its volumes surged by 6 per cent - higher than street estimates of 2-3 per cent.

According to Abneesh Roy, Director for institutional equities, Edelweiss Securities, during the quarter HUL “continued to grow significantly ahead of the market, gaining value and volume market shares”.

However, growing costs impacted its margins. During the quarter, its cost of raw materials surged 32.3 per cent y-o-y to Rs 4,868 crore, from Rs 3,680 crore. While its spend on advertisements and promotions (A&P) grew by 20 per cent to Rs 1,334 crore. As a result, HUL’s total expenses expanded to Rs 11,531 crore - or 21 per cent higher over last year same quarter. As a result, its gross margin contracted by 309 basis points, as per analyses by Prabhudas Lilladher. While its EBIT (earnings before interest and tax) surged by 14 per cent, margin contracted by 110 basis points YoY and 144 basis points quarter-on-quarter to 23.2 per cent.

While its sales from personal care business that includes brands like Dove, Ponds, Lux and Pears, grew by 18 per cent to Rs 5,406 crore, its EBITDA margin for the segment contracted by 184 basis points.

In foods & refreshments category, comprising Kwality Walls, Bru, Kissan and Horlicks, topline growth (at 9.3 per cent) remained much lower than its overall growth. Coupled with steep commodities inflation, EBIT shrank by 3.7 per cent yoy, while margin contracted by 214 basis points to 15.9 per cent. According to Amnish Aggarwal - Director Research at Prabhudas Lilladher, growth in the category was led by HUL's ice-cream, coffee and food solutions.

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