Hindustan Unilever puts up a good show in tough times

By: |
Published: July 22, 2020 4:15 AM

The FMCG giant’s 7% y-o-y growth in its stand-alone net profit at Rs 1,881 crore was well ahead of Bloomberg’s consensus estimates of Rs 1,721.57 crore.

HUL’s revenues from operations in Q1FY21 grew a modest 4.4% y-o-y to Rs 10,560 crore, ahead of the estimated Rs 9,880 crore.HUL’s revenues from operations in Q1FY21 grew a modest 4.4% y-o-y to Rs 10,560 crore, ahead of the estimated Rs 9,880 crore.

In a better–than–expected performance, Hindustan Unilever (HUL) on Tuesday reported a fall in volumes of just 7% year-on-year for the June quarter against estimates they would be lower by 11-13% y-o-y.

The FMCG giant’s 7% y-o-y growth in its stand-alone net profit at Rs 1,881 crore was well ahead of Bloomberg’s consensus estimates of Rs 1,721.57 crore.

The HUL management attributed the good showing partly to better rural demand, which it observed had been subdued before Covid-19 hit, but was showing some signs of revival. “There is certainly a bounce-back in rural growth vis-a-vis urban,” Sanjiv Mehta, CMD, HUL, said in an interaction with the media.

Mehta, nonetheless, that the near-term outlook remained uncertain and that it was difficult to estimate market growth and demand.

The HUL chief believes much would depend on how soon the world can come up with a vaccine to fight the Covid-19 virus and how quickly the infection curve in India starts moving southwards.

The HUL management said the September quarter would reveal a better picture of the underlying demand but noted supply chain disruptions, due to lockdowns in several parts of the country, needed to be reduced.

HUL’s revenues from operations in Q1FY21 grew a modest 4.4% y-o-y to Rs 10,560 crore, ahead of the estimated Rs 9,880 crore. The reported turnover includes the GSK Consumer’s business. However, on a like-to-like basis, HUL’s turnover declined by 7% y-o-y.

Despite the ongoing pandemic, 80% of HUL’s portfolio saw a 6% y-o-y growth and the nutrition business (including GSK Consumer’s products) grew by 5%. Consumption patterns in the out- of- home categories like ice creams, food solutions, vending and other discretionary items like skin care, colour cosmetics and deodorants were impacted negatively.

Operating margins fell by a sharp 120 basis points y-o-y to 25% due to a fall in out of home consumption and discretionary items, while the operating income remained flat at Rs 2,640 crore.

Srinivas Phatak, CFO, HUL said some parts of the business in health, hygiene and nutrition will see a bit of demand uptick but that is not the broader demand picture. “There will be parts of the country that will fair better, rural could be better, it could be resilient. But looking at the totality we will have to see without supply disruptions for the quarter before we have a good read of the demand outlook”.

Kaustubh Pawaskar, AVP Research (Consumer Goods & Discretionary), Sharekhan by BNP Paribas, says, “Higher demand from rural markets and sustained strong demand for essentials are near term growth drivers for HUL. “

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1AGR dues: Telcos proceeded with spectrum sale as DoT delayed filing appeals
2Telcos warn customers on using dial-in numbers of online meeting apps like Zoom, BlueJeans, Microsoft Teams
3Premium plans: Trai not satisfied with replies of Vodafone Idea and Airtel