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Q3-2016: HUL YoY marketing spends up 16.4%

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BENGALURU: Indian FMCG giant Hindustan Unilever Limited (HUL) Advertisement and Promotions expense (marketing spends, ASP) in Q3-2016 (quarter ended 31 December, 2015, current quarter, Q3-16) was 16.4 per cent more YoY at Rs 1,137.79 crore (14.3 Total Income from operations or TIO) as compared to Rs 977.12 crore (12.6 per cent of TIO), but declined 0.6 per cent QoQ from Rs 1,145.04 crore (14.4 per cent of TIO).

Note: (1) 100 lakh = 100,00,000 = 1 crore = 10 million.

(2) All figures in this report are standalone figures filed by the company. The trends are based on the numbers submitted by the company or picked up from the company’s website.

Company Speak

HUL chairman Harish Manwani said, “We have stepped up investment behind our brands and delivered another quarter of profitable volume led growth, consistent with our strategic intent. In an environment of moderating growth and benign input costs, we remain focused on innovation and market development to drive volumes competitively whilst improving operating margins. As channels and markets evolve, we continue to make strategic interventions to strengthen our portfolio and sharpen our executional capabilities to serve our consumers even better.”

Advertising and Sales Promotion (ASP) trends

Last quarter (Q2-16), HUL’s ASP was the highest both in terms of absolute rupees and percentage of TIO at Rs 1145.04 crore and 14.4 per cent during a 15 quarter period starting Q1-2013 until Q3-2016. The current quarter’s ASP (mentioned above) is the second highest during the same period. It must be noted than in the current fiscal (FY-2016) during all the three quarters to date, HUL’s ASP has been the highest in rupees and in terms of percentage during the period under consideration and has been above 14 per cent – in Q1-2016, it was 14.2 per cent.

The lowest ASP in absolute rupees was in Q2-2013 at Rs 768.98 crore (12.2 per cent), while it was lowest in terms of percentage of TIO in Q4-14 at 11.8 per cent (Rs 840.34 crore). The white broken trend line indicates that ASP in absolute rupees during the period under consideration shows an upward trend. ASP in terms percentage of TIO (broken pink line) also shows an upward trend, though not as sharp as in the case of absolute rupees during the period under consideration. As a matter of fact, since Q1-2013, the company’s ASP has been the highest in absolute rupees in the first quarter (Q1) and the lowest in the second quarter (Q2), the only exception being in the year 2014, where Q2-2014 ASP was the highest in the year and was more than Q1-2014 ASP, which was second highest in that year. In FY-2013 and FY-2014, ASP was lowest in Q4, while in Q4-2015, ASP was more than in Q3-2015.

HUL Revenue and PAT

Please refer to Fig B above. HUL reported 2.7 per cent YoY growth in TIO in Q3-2016 at Rs 7,980.99 crore as compared to Rs 7,774.32 crore and was 0.3 per cent higher QoQ as compared to Rs 7,955.39 crore. The company’s TIO shows a linear increasing trend as indicated by the broken blue trend line in Fig B. TIO in Q1-2016 is the highest reported by the company during the 15 quarter period under consideration in this report.

HUL’s PAT in Q3-2016 was 22.4 per cent lower YoY at Rs 971.40 crore (12.2 per cent margin) as compared to Rs 1,252.17 crore (16.1 per cent margin) and was one per cent more QoQ as compared to Rs 962.24 crore (12.1 per cent margin). During the period under consideration, HUL’s highest PAT was highest in Q1-2013 at Rs 1,331.19 crore (20.9 per cent of TIO), both in terms of absolute rupees and in percentage of TIO. While PAT in absolute rupees shows a linear increasing trend as indicated by the broken pink trend line in Fig B, while in terms of percentage of TIO, the linear trend is declining as indicated by the broken yellow line.

HUL’s take on categories and its brands

Soaps and Detergents

Robust volume growth offset by price deflation was seen. The segment witnessed continued price deflation in the quarter given the benign input costs. Skin Cleansing was driven by strong volume growth on Dove, Pears and Lifebuoy. The liquids portfolio registered another quarter of double digit growth. In Laundry, growth momentum was sustained with both Surf and Rin growing volumes in double digit while Comfort Fabric Conditioners led market development of the category and delivered another quarter of high growth. Household Care performance was driven by Vim.

Personal Products

The reported growth of this segment was impacted by the delayed winter and the one-time realignment of channel spends undertaken with a view to driving its effectiveness in the marketplace Skin Care delivered volume led growth driven by Fair and Lovely, Pond’s and Lakme. Fair and Lovely continued to do well and saw an encouraging response to the BB cream. The performance of Pond’s was led by premium skin lightening while Lakme growth was buoyed by premium innovations and facewash. Hair Care maintained its strong volume led growth momentum, with Dove and TRESemmé leading the category performance. In Oral Care, the overall performance was subdued. Close Up growth was driven by impactful activation while Pepsodent Clove and Salt continued to do well. Lakme Colour Cosmetics sustained its strong innovation led growth across the core, Absolute and 9 to 5 ranges.

Beverages

In Tea, Red Label, Taj Mahal and 3 Roses grew well, driven by focused in-market initiatives. Lipton Green Tea registered another quarter of high growth on sustained market development. In Coffee, Bru delivered double digit growth and achieved market leadership.

Packaged Foods

The segment saw its ninth successive quarter of double digit growth. Sustained market development and recent innovations resulted in another quarter of double digit growth across all key brands. Kissan maintained its strong growth momentum across both Ketchups and Jams. Knorr growth was led by new variants of Instant Soups and a new range of Knorr Chef’s Masalas was introduced at the quarter end. Ice Creams delivered another strong quarter, led by Magnum and sharper in-market execution on Kwality Walls.

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