Sucheta Dalal :HUL continues to suffer from poor sales and profit growth
Sucheta Dalal

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HUL continues to suffer from poor sales and profit growth  

November 3, 2009

 

Despite endless restructuring of its business portfolios and continuous high-profile change of its top management, Hindustan Unilever is unable to generate any traction on its sales and profits. For the September quarter, HUL’s revenues were up by 4% while operating profit was completely flat. Compare this with the performance of Dabur India whose revenues were up by 15% while Emami Group’s sales were up by 27%.
 
HUL’s revenue growth has been stagnant for many quarters now. Over the past three quarters, average topline growth has ranged between 4%-6% which does not even cover inflation. Revenue growth has been continuously declining from a high of 20% it recorded in September 2008.
 
The recent September quarter has been especially good for fast-moving consumer goods (FMCG) companies mainly because raw material prices were sharply down in that quarter. For instance, Emami’s raw material cost was down by 35% and even Godrej Consumer Products Limited’s (GCPL’s) raw material cost was down by 15%. Both these companies took advantage of lower cost of raw materials and steady demand for their products. Emami’s operating profit was up by as much as 65%. On the other hand, even though HUL’s raw material cost was down by 9%, it had no profit growth. Dabur’s raw material cost has gone up by 3% and yet it has reported a sales growth of 15% compared to the same quarter last year. What is remarkable about HUL is that it had to spend 41% more on advertising compared to same quarter last year to get only a 4% growth in turnover this quarter (Q2 FY 10).
 
Another key issue with HUL is that it would maintain its high operating profit margin (39% in September 09) rather than creating growth in sales and operating profit. Interestingly, Dabur also enjoys an OPM of 36% which is as high as HUL but Dabur is able to increase its operating profit and revenues virtually every quarter. In the September quarter Dabur’s operating profit jumped by 21% compared to the same quarter last year.
–Debashis Basu with Pallabika Ganguly
[email protected]

-- Sucheta Dalal



 



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