Unilever’s Indian Unit Sees Impact of Modi’s Cash Ban Fadingby
October-December net income rose 7% to 10.4 billion rupees
Chairman Manwani reports early signs of ’normalization’
Hindustan Unilever Ltd. reported quarterly profit that beat estimates as Chairman Harish Manwani of India’s largest consumer goods company said there are early signs the impact of Prime Minister Narendra Modi crackdown on cash is fading.
Net income of the maker of Lux sops and Bru coffee rose 7 percent to 10.4 billion rupees ($153 million) in the three months ended December, the Mumbai-based company said in a statement on Monday. That compares with the 9.73 billion rupee average of 24 analyst estimates compiled by Bloomberg.
Sales volume declined for a second straight quarter and revenue fell 0.7 percent to 83.2 billion rupees, against the 74 billion rupee average of 18 estimates. The market has been impacted by “adverse liquidity conditions,” Manwani said in the accompanying statement, adding that there were early signs of “normalization.”
The government’s measure to ban two high-denomination notes in November created a cash crunch among consumers in Asia’s third-largest economy. The Indian unit of the Dutch-British Unilever has said it sees demonetization as a positive policy event, while expecting market growth to be adversely impacted for a few months.
“I won’t look too much into the third-quarter numbers as demonetization did have a marginal impact on purchasing power and consumption,” Purvesh Shelatkar, senior vice president of institutional sales, Centrum Broking Ltd. “I would give it a couple of more quarters as cash transactions were certainly impacted. If the stock were to fall on this, I will certainly buy.”
Shares of Hindustan Unilever rose 0.2 percent to 862.40 rupees at the close of trading in Mumbai, compared with a 0.3 percent advance in the benchmark S&P BSE Sensex.
Sales volume fell 4 percent in the quarter after declining 1 percent in the preceding three-months, said Chief Financial Officer P B Balaji. The company expects a gradual recovery of demand, including in the rural market because of a good monsoon, he said. The company has extended credit limits to stakeholders to help them counter the cash ban, he said, adding all financial impact has been accounted in the December quarter earnings.
For the quarter under review, spending on advertising and promotions fell 3.9 percent to 8.85 billion rupees. The company also recorded a one-time exceptional item of profit on sale of surplus properties of 1.59 billion rupees.