http://www.morningstar.com/earnings/51607442-hindustan-unilever-ltd-500696-q4-2013.aspx

Hindustan Unilever Ltd 500696
Q4 2013 Earnings Call Transcript

Transcript Call Date 04/29/2013

Dinesh Thapar - IR: Thank you, Sauradeep. Good evening and welcome to the March quarter 2013 results conference call of Hindustan Unilever Limited. As always, we have this evening with us Mr. Nitin Paranjpe, CEO and Mr. R. Sridhar, CFO on the call from the HUL end.

As is customary, we will start with the presentation from Sridhar where he shares aspects of our performance in March quarter and then hand over to Nitin for him to share his perspectives on the business performance.

Before we start the presentation and hand over to Sridhar, I would like to draw your attention to the Safe Harbor statement included in the presentation for good order sake.

With that thank you and over to you Sridhar.

Sridhar Ramamurthy - CFO: Thank you, Dinesh, and welcome everyone to our results call both for March quarter as well as the financial year which ended 31st of March.

Before I move forward, just to set the strategy. As you know, the strategy of the company is ensigned in what we call (Come First) which is the strategic framework. Our business philosophy, business model is outlined in the Sustainable Living Plan and our goals remain unchanged which is about delivering growth that is competitive, consistent, profitable and responsive. So no change in our strategy, no change in the goals that we are trying to deliver.

Before we go into the performance of March quarter, a few words around the business environment in March quarter. FMCG markets continued to grow in March quarter. However, we did see moderation in both volume and value growth across several FMCG categories. This was particularly pronounced in the Modern Trade channel as well as in discretionary categories overall.

Further, price growth in the soaps and detergents categories has been fading in the market.

The environment related to input costs was overall fairly benign, however competitive intensity remained high during the quarter. To give you a flavor of the input cost environment, the four key drivers that are shown in the chart, you will see that while Brent crude remained broadly at the same level sequentially with the December quarter and slightly lowered compared to March quarter, North Indian tea continue to show an inflationary trend. On the other hand, palm oil was distinctly weaker and softer both relative to the prior quarter and the prior year.

Exchange rates are clearly stabilized though on a one year basis there seems to be a depreciation of about 8%. So, overall input costs were fairly benign. In this environment, I think we have delivered growth that is consistent, that’s broad based and competitive and delivers an improvement in margins. Our Domestic Consumer business grew by 13% with underlying volume growth at about 6%. The reported underlying volume growth includes the impact of the up-stocking at end of March in preparation for a transport strike, stripped of this, the underlying volume growth in March quarter would be around 5.5%.

At Home and Personal Care, categories grew at 13% in the quarter while our Foods & Beverages categories grew by 15%. Operating margin expanded by a further 60 basis points. This is after taking into account a step-up of 90 basis points in our A&P spends. This operating margin improvement is also after absorbing the increased level of royalty costs which kicked in from first February estimated impact in this quarter is about 30 to 35 basis points. Profit after tax before exceptional items showed a healthy improvement of 18%.

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