Hindustan Unilever Expects Volume Growth To Moderate In Fourth Quarter

Hindustan Unilever Ltd. expects volume growth in the fourth quarter to drop below 10 percent for the first time in one-and-half years.

Following the company’s disclosure at a recent call with analysts, brokerages, including Bank of America Merrill Lynch and Deutsche Bank, expect volume growth—which has averaged around 11 percent in the last five quarters—to range between 6 percent and 7.5 percent.

CLSA said that the moderation in growth is visible in rural as well as urban segments following an interaction with the management. The rural segment has grown at 1.3 times that of urban in the current fiscal so far, it said. Attributing the slowdown to weak macro environment, CLSA said that the effects of measures in the interim budget to boost consumption will take time to show up.

Bank of America Merrill Lynch expects the ratio of rural to urban growth to fall to 1.2 in the fourth quarter. While CLSA and Deutsche Bank said that competitive intensity has stabilised, Deutsche Bank said that the impact of additional marketing spends, such as promotions carried out during the Kumbh Mela, was little.

While the management expressed concerns about volatility in input costs, CLSA and Deutsche Bank expect modest expansion in HUL’s operating margins.

However, BofaML, while commenting on the merger of the Indian consumer businesses of HUL and GlaxoSmithKline Plc, said that it doesn’t rule out further gains in the company’s share price once the merger has been complete.