Soap price hike, demonetisation may hurt Hindustan Unilever Q3 revenues
Home and personal care products major, Hindustan Unilever (HUL), may have its sales impacted due to demonetisation; however, as it prepares to announce its third quarter results today analysts cite another reason for its possible 2% decline in revenues.
“HUL’s domestic FMCG business to post 2% decline in revenues due to 5% yoy decline in underlying volume growth (UVG) and 3% price-led growth (aided by recent price hikes across categories, especially soaps),” Rohit Chordia, Anand Shah and Abhas Gupta, analysts of Kotak Institutional Equities said in a report dated January 3.
Analysts said that as the company hiked the price of soaps around the second quarter of FY16, demonetisation will have an accomplice as it too put pressure on the company’s sales.
“Apart from demonetization impact, we expect UVG to be dragged by sustained impact of promotion withdrawal in soaps (category-level impact),” the analysts added.
In an earlier report by Zeebiz we said that companies in the personal care products’ universe would do better than other FMCG products.
Citing a report by Phillip Capital analysts Naveen Kulkarni, Jubil Jain and Preeyam Toli said, “We expect all FMCG companies in the PC Universe to report single-digit declines in sales, except ITC (strong cigarette volumes), Nestle (low base) and GCPL (high international share).”
However, HUL’s price hike strategy may come back to haunt them this quarter amidst cash crunch woes.
Estimating that the company’s general margin (GM) will contract considerably, the analysts said, “…recurring PAT to decline 8% yoy due to 65% bps yoy contraction in EBITDA margin (largely due to contraction in GMs).”
Shares of the company were trading cautiously during early trade on BSE Sensex.
HUL’s shares were trading flat during the first hour of trading as it opened at Rs 855.5 and was trading at 864 per share, up just 0.34% from its previous price.