Shares in Hindustan Unilever are likely to see a drop, when trading resumes on Monday. The company's quarterly results lagged estimates, especially on the volume front, thanks to the Covid-19 outbreak.
7% Volume decline unexpected
Hindustan Unilever reported a volume decline of as much as 7 per cent. Most analysts were expecting a volume decline of around 3 to 4 per cent, so a larger volume decline came as a surprise.
Looking forward the numbers for the quarter ending June 30, 2020 is likely to be even worse, as the lockdown period would be longer The problem is that there could even be some pressure at least for a few more quarters, as purchasing power of many individuals has reduced dramatically.
"The spread of COVID-19 impacted the business from mid-March, which culminated into scaling down of operations post the national lockdown. Domestic consumer growth declined by 9 percent with a decline of 7 percent in underlying volume growth," HUL said in its BSE filing.
The silver lining
HUL reported a 1.2 percent decline in standalone profit to Rs 1,519 crore for the March-ended quarter from Rs 1,538 crore in the same period last year. Revenue from operations in for the quarter under review fell by 9.4 percent on a year-on-year basis to Rs 9,011 crore due to decline in sales volumes due to the lockdown imposed to curb the spread of coronavirus pandemic.
The silver lining for the company is that margins are likely to be good going forward, given that input costs have reduced significantly. For a couple of more quarters, there maybe some pain for the company, but, thereafter things may be back on track.
Shares of Hindustan Unilever closed at Rs 2,195 on the National Stock Exchange on Thursday. Trading is likely to resume only on Monday and in all likelihood we could see a drop in the share price of the company.