HUVR reported a 7.9% decline in EBITDA, despite a 12% revenue growth. Volume growth at 13% has been strong. Soaps & detergents recorded a sharp 39% drop in EBIT, while personal products EBIT grew at 8%. The company has raised prices of soaps & detergents portfolio by 5% since Q3FY11.

Q3FY11 net sales growth 12%
􀀟 HUVR reported a net sales growth of 12%, which was driven a strong volume growth of 13%.The management indicated that there was double digit volume growth across all its categories, and its growth was above the market growth's indicating improvement in market shares. The personal products business grew at 20.1%, while the soaps & detergents business grew at 6%. This has been the fourth consequtive quarter of double-digit volume growth.

EBITDA declines by 7.9%, worse than expected.
􀀟 HUVR recorded a 310bps drop in margins y.o.y to 14.1% driven by 210bps rise in raw material cost to net sales, and 80bps rise in advertisement cost to net sales. The soaps and detergents business recorded 39% drop in EBIT, with margins dropping to its historic low levels at 7.7%. While, the sharp rise in inputs costs was the key factor for the same, we had anticipated that HUVR would have taken some forward covers for the same given its global sourcing skils. The company has taken up prices by 4-5% in soaps and detergents business in January 2011, which impact 4QFY11 earnings positively.

Buy back at max price of Rs280/shr or total Rs6.3bn, could act as support
􀀟 Post the management contact, we will review our earnings numbers to factor in the weaker than expected EBITDA margins. The base effect of EBITDA margins would turn favourable from Q4FY11 onwards, as it was in Q4FY10, that HUVR faced the sharp margin correction with EBITDA margins at 13.6%. We expect EBITDA growth to return to positive zone from the Q4FY11 onwards. The structural drivers remain intact i.e the company is witnessing improving market shares, and volume growth remain strong. High advertisement spends to correct 3-4 year period of market share losses, coupled with sustained high inflation in raw material prices have impacted margins.