MAM

Q1-2016: HUL y-o-y marketing spends up 22%

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BENGALURU:  Indian FMCG giant Hindustan Unilever Limited’s (HUL) Advertisement and Promotions expense (marketing spends, ASP) in Q1-2016 (quarter ended 30 June, 2015) was 22.1 per cent more at Rs 1153.39 crore (14.2 per cent of Total Income from operations or TIO, approximately $181.4 million) than the Rs 944.88 crore (12.2 per cent of TIO) in Q1-2015 and was 12.2 per cent more than the Rs 1027.89 crore (13.4 per cent of TIO) in Q4-2015.

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. For performance of HUL’s various product lines please refer to the attached earnings release for Q1-2016.

(3) The US dollar figures are approximately based on a conversion rate of 1US$ = Rs 63.57.The converted numbers have been rounded off.

HUL chairman Harish Manwani said, “In a subdued market environment, the business delivered another quarter of healthy volume led growth and strong improvement in operating margin. We are particularly pleased with the stepped up momentum in personal products and the sustained double digit performance in packaged foods. With the near term outlook largely dependent on pickup in rural markets and commodity costs expected to remain benign with little or no price growth across select categories, our focus will be to drive market development and simultaneously deliver cost efficiencies to sustain profitable volume led growth.”

Advertising and Sales Promotion trends

As a matter of fact, HUL’s ASP in Q1-2016 is the highest during a 13 quarter period starting Q1-2013 until Q1-2016, both in terms of percentage of TIO and in absolute rupees. During the period under consideration in this report, ASP in absolute rupee spends shows a marked linear increasing trend, while ASP in percentage of TIO terms shows a slight linear increasing trend, though more marked than until the previous quarter. The company’s lowest ASP was in Q2-2013 at Rs 768.98 crore  (12.2 per cent of TIO) in absolute rupee spends during the period under consideration, while the lowest in terms of percentage of TIO was in Q4-2014 at 11.8 per cent of TIO (Rs 840.34 crore). Please refer to Fig A below.

If the company follows the trends of the past three fiscals, at least one or more quarter in FY-2016 will see higher ASP in terms of absolute rupees than Q1-2016.

HUL Revenue and PAT

HUL reported five per cent growth in TIO in Q1-2016 at Rs 8105.13 crore as compared to the Rs 7716.34 crore in Q1-2015 and reported 5.6 per cent growth as compared to the Rs 7094.01 crore in the immediate trailing quarter. The company’s TIO shows a linear increasing trend as indicated by the broken blue trend line in Fig B below. TIO in Q1-2016 is the highest reported by the company during the 13 quarter period under consideration in this report.

HUL’s PAT in Q1-2016 was almost flat (higher by 0.2 per cent) at Rs 1059.14 crore (13.1 per cent of TIO) as compared to the Rs 1056.85 crore (13.7 per cent of TIO) in the corresponding quarter of last year and was four per cent more than the Rs 1018.08 crore (13.3 per cent of TIO) in Q4-2015. During the period under consideration, HUL’s highest PAT was in Q1-2013 at Rs 1331.19 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 below, while in terms of percentage of TIO, the linear trend is declining as indicated by the broken yellow line below.

HUL Speak: Category and brand growth 

HUL says that during Q1-2016, its domestic consumer business grew at five per cent, with six per cent underlying volume growth. The growth in the quarter was impacted by the phasing out of excise duty incentives and price de-growth, as the benefit of lower commodity costs was passed on to consumers.

Soaps and Detergents

In Skin Cleansing, the performance was driven by the premium segment, with Dove and Lifebuoy Handwash delivering strong growth.

In Laundry, Surf maintained its strong volume led growth momentum with broad based double digit growth. Rin did well on the bars portfolio, while Comfort Fabric Conditioners delivered another quarter of high growth on sustained market development.

In Household Care, Vim delivered double digit volume growth, driven by the tubs and liquids formats.

The quarter witnessed further price deflation across these categories given benign input costs.

Personal Products

Skin Care delivered broad based volume led growth across Fair and Lovely, Pond’s, Lakme and Vaseline. Fair and Lovely saw an encouraging response to the newly launched BB cream. Pond’s performance was led by premium skin lightening and facewash while Lakme’s growth was buoyed by CC Cream, Perfect Radiance and new innovations.

Hair Care maintained its strong volume led growth momentum. Dove growth accelerated further, while Clinic Plus, Sunsilk and TRESemmé continued to deliver robust growth.

In Oral Care, Close Up grew in double digit, supported by impactful market activation. In Pepsodent, the Gum Care and Clove & Salt variants continued to do well, with the latter been extended nationally during the quarter.

In Colour Cosmetics, Lakme sustained its strong innovation led performance across the core, Absolute and 9 to 5 ranges.

Beverages

Tea delivered double digit growth with healthy volumes, led by Red Label and another strong quarter on Lipton Green Tea. In Coffee, Bru Gold sustained its robust growth momentum.

Packaged Foods

Market development continues to be the key driver of growth in this segment says HUL. Kissan delivered one of its strongest quarters as growth accelerated across both ketchups and jams. Knorr grew despite a sharp market slowdown in the quarter, led by instant soups. Ice creams registered double digit growth, driven by sharper in-market execution on Kwality Walls and the extension of Magnum to new cities.

Water

Pureit sustained its growth ahead of a slowing durables market, with premium devices delivering another quarter of double digit growth. The category performance continued to be led by modern trade, ecommerce and Perfect Stores

Click here to read the unaudited financial statement 

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