Hindustan Unilever Ltd. Earnings Call Nuggets: Gross Margin Expansion and New Royalty Agreement

Hindustan Unilever Ltd. (HUL.BO) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Gross Margin Expansion

Abneesh Roy – Edelweiss: My first question is on the soap and detergent business. We have seen gross margin expansion, but ad spend has been ahead of that, due to which EBITDA margins have contested. Wheel has seen some issues. So wanted to understand these ad spend, very high ad spend, is it because of expected gross margin expansion further? Is it because of issuing the Wheel? Is it because of the new product innovation in Lifebuoy? If you could give clarity on what is happening in Wheel?

Markets are at 5-year highs! Discover the best stocks to own. Click here for our fresh Feature Stock Pick now!

Sridhar Ramamurthy – CFO: So, I think you are absolutely right in the first observation that gross margins have expanded in the segment and A&P levels have gone up even faster. The result of the segmental margins have come up, we have stated time and time again that we should – this is the contention to analyze quarter performance in terms of how these movements are and draw conclusion beyond what are necessitated. You would have noticed that this segment has shown strong expansion in margins over the last many quarters, over the last September quarter, into this quarter A&P levels were stepped-up based on what we found in the marketplace and upward, policies of making sure that we remain competitive in terms of our investments in the marketplace and some of the innovations that we has. So primarily the guiding factor in this quarter was to make sure that on principles and criteria which we have in terms of (indiscernible) market et cetera we stepped up reflecting the competitive intensity which have gone up in the service.

Abneesh Roy – Edelweiss: If you grow further, is it that whenever we see the gross margin to expand and then you see the local players come back. In Wheel also we’re seeing some issue. So on the lower-end are you seeing marked increase in the lower players competitive intensity?

More Articles About:   ,