BENGALURU: Indian FMCG giant Hindustan Unilever Limited’s (HUL) Advertisement and Promotions expense (ASP) in Q3-2015 at Rs 977.12 crore (12.6 per cent of Total Income from operations or TIO) was 5.1 per cent more than the Rs 929.46 crore (12.9 per cent of TIO) in the corresponding quarter of last year and 5.6 per cent more than the Rs 925.05 crore (12.1per cent of TIO) in Q2-2015.

During the nine month period ended 31 December 2014 (9M-2015) the company’s ASP at Rs 2807.05 crore (13.3 per cent of TIO) was 2.7 per cent more than the Rs 2773.26 crore (12.5 per cent of TIO) during 9M-2014.

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 company reported a 7.6 per cent y-o-y jump in TIO in Q3-2015 to Rs 7774.32 crore from Rs 7223.35 crore in Q3-2014 and just a meagre 1.8 per cent increase from the Rs 7639.33 crore in Q2-2015. YTD, HUL’s TIO at Rs 23129.98 crore was 10.5 per cent more than the Rs 20925.03 crore in 9M-2014.

Fig A below shows the ASP trend of the company over an eleven quarter period starting Q1-2013 until the current quarter Q3-2015. In terms of absolute rupees, ASP shows an upward linear trend with the current quarter’s ASP being the highest. ASP in Q2-2013 (Quarter ended 30 September 2012) at Rs 768.98 crore (12.2 per cent of TIO).  ASP in terms of per centage of TIO was highest in Q2-2014 at 13.8 per cent (Rs 954.02 crore), while the lowest ASP in terms of per centage of TIO was in Q4-2014 at 11.8 per cent (Rs 944.88 crore). The company’s ASP in terms of per centage of TIO shows a declining trend.

Fig B below indicates HUL’s TIO and PAT trends during the above mentioned eleven quarter period. The company’s TIO shows an upward linear trend with the current quarter’s TIO highest and TIO during Q2-2013 being the lowest at Rs 6318.81 crore. During the period under consideration, TIO in Q1-2015 registered the highest q-o-q growth at 8.8 per cent to Rs 7716.34 crore from Rs 7094.10 crore in Q4-2014. TIO in Q4-2014 registered the sharpest drop at 1.8 per cent from Rs 7223.35 crore in Q3-2014 during the same eleven quarter period.

HUL recorded an increase of 17.9 per cent in PAT to Rs 1252.17 crore (16.1 per cent of TIO) in Q3-2015 from Rs 1062.31 crore (13.3 per cent of TIO) in Q3-2014 and a 26.7 per cent increase from Rs 988.16 crore (12.9 per cent of TIO) in Q2-2015. During 9M-2015, PAT grew 10.1 per cent to Rs 3297.17 crore (14.3 per cent of TIO) from Rs 2995.36 in 9M-2014. In terms of per centage of TIO,  as well as in absolute rupees, HUL’s PAT was highest in Q1-2013 at 20.9 per cent and Rs 1331.19 crore. While PAT shows a slight linear decline in absolute rupees during the period under consideration, in terms of per centage of TIO, the linear decline is more marked.

Kotak Securities FMCG analyst Ritwik Rai said, “HUL’s Q3-2015 results disappointed as volume growth (3 per cent, y-o-y) missed our estimates (5 per cent estimate). The company has reported that its volume and value growth remains ahead of the sector. Gross margins expanded in line with expectations. Excluding one-time provisions in employee expenses, the reported EBITDA came in 5 per cent below our estimates. We would expect that sales growth of the company shall pick up in the coming quarters, as lower inflation, improved sentiment help lift volume growth. Benefits of lower commodity prices are visible in the quarter, and will continue to be a useful tailwind for the company. The stock could see some near-term pressure, given sharp run-up in recent sessions and disappointing Q3-2015 results. However, our medium-term view on the stock remains constructive.”

HUL chairman Harish Manwani added, “We have delivered another quarter of competitive growth and margin improvement. We continue to strengthen the core of our business and drive the competitiveness of our brands in the market. At the same time, we are leading market development in relatively nascent categories such as packaged foods  and premium personal care with strong results. Given the fast changing external environment, we are managing our business dynamically for sustained volume led growth and margin improvement.”