Home » HUL and ICICI Bank Q1 results, ECB policy rate

HUL and ICICI Bank Q1 results, ECB policy rate

    Every Monday, Mint’s Plain Facts section features key data releases and announcements to keep an eye out for the coming week. From the European Central Bank’s (ECB’s) monetary policy meeting on Thursday to the June quarter financial results of Hindustan Unilever Ltd (HUL), ICICI Bank, and three major cement companies, this week promises to be data-rich. Here are the key numbers to track over the next seven days:

    1. HUL results

    Hindustan Unilever Limited (HUL), a leading packaged consumer goods company, will announce its earnings for the June quarter on Thursday. Analysts predict strong year-on-year growth for the sector, riding on a sunken base and improved adaptability to lockdowns. Staples-heavy firms, such as HUL, are set to perform even better as rural demand was by and large robust during the second wave. Sales in the staples segment could exceed pre-pandemic levels.

    HUL’s hygiene and healthcare products saw healthy growth during the quarter, which could drive a 5% y-o-y expansion in volumes and 9% sales growth, said analysts at Motilal Oswal Financial Services. Rising raw material costs are a pain point, but price hikes in products will prop up revenues.

    Investors will track the company’s guidance on its high-margin discretionary goods segment, which accounted for 15% revenue share in pre-pandemic times, but has been hurt by lockdowns. Recovery is largely expected in the segment in coming quarters if the pandemic is contained.

    2. ICICI financials

    ICICI Bank, the country’s second largest private sector lender, will release its June quarter results on Saturday. The second wave disrupted recovery in the banking sector, with credit growth remaining sluggish during the quarter. The retail component, which accounts for roughly 65% of the total loans disbursed by the bank, was particularly stressed amid widespread household distress, primarily in the automobile, property, and personal credit segments. However, analysts expect larger lenders, such as ICICI Bank, to do relatively better than the rest. Most forecasts pegged around 15% y-o-y growth on a low base in net interest income, while sequential growth could be subdued at 0-2%.

    While the pandemic stress will lead to a decline in asset quality, ICICI Bank has far better fundamentals than its peers. S&P Global Ratings expects the lender’s stressed loans to peak this year. More clarity from the bank on the second wave’s impact, including through covid-related provisions, is awaited on the earnings day.

    3. Cement earnings

    Three cement majors will announce their June quarter results: ACC on Monday, UltraTech Cement on Thursday and Ambuja Cements on Friday.

    The sector was recovering steadily when the second wave hit. Demand took a beating but rebounded strongly in June as curbs eased. However, monsoon showers kept offtake low in some regions.

    On a year-on-year basis, the sector is set to report around 50% revenue growth on the back of an ultra-low base, analysts said. The sequential decline is pegged at around 15%.

    Rising raw material, fuel and freight costs were a drag during the quarter, but sharp price hikes are likely to limit the damage. Share markets responded positively to the price increases, with ACC, Ambuja, and UltraTech stocks up 1-10% in the June quarter.

    4. ECB policy rate

    On Thursday, the governing council of the ECB will hold its first meeting since it approved a new monetary policy strategy to deal with post-covid macroeconomics.

    When the euro area inflation rose to the 2% ceiling in May, investors were worried that the ultra-easy monetary policy could be on its way out. But the new goalpost—to keep inflation at a “symmetric 2%” in the medium term and below that mark—shows the central bank may be warming up to the present inflation surge, and could be prepared to accept it for some time. It signals a dovish intent for now: with economic recovery still at a nascent stage, the ECB may want extra room to keep asset purchases on for longer.

    But the level of dissent within the council will tell how soon the stance is likely to change. ECB president Christine Lagarde has hinted that all members may not be on board with the higher tolerance for inflation: some have even called for withdrawing stimulus. The unanimity on the new strategy will be on test.

    5. Germany & France PMI

    The provisional purchasing managers’ index (PMI) for the two largest euro area economies—Germany and France—will be out on Friday. The numbers will throw light on the pace of business recovery in the two economies in July. Manufacturing activity has got a boost from pent-up demand, and the jobs outlook looks strongest in years. There is some relief on the strained input side, too: firms are now passing on the burden of higher raw material costs and supply shortages to consumers.

    The services sector, a slow starter due to repeated pandemic waves, is showing an uptick. In Germany, the sector expanded at its fastest in a decade in June. In France, a record-high business confidence has kept progress in manufacturing and services more uniform than the rest of Europe. A recent uptick in covid-19 cases, due to the delta variant, has created some flutter, but high vaccination coverage is likely to mitigate some of the risk.

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