HUL net up 9% at Rs 2,187 cr

By: |
October 20, 2021 8:05 AM

Demand revives but inflation a concern; mobility booster on back of vaccination drive, lower infection rates

HULDuring the period, the company’s standalone revenues from operations grew 11% year-on-year to Rs 12,516 crore, while net profit rose 9% to Rs 2,187 crore.

Hindustan Unilever (HUL), the country’s largest consumer goods manufacturer, on Tuesday reported broad-based growth across categories during the July-September quarter, as mobility improved on the back of the government’s vaccination drive and lower infection rates. Even though rural demand saw some moderation due to the base effect, urban demand held up. In some categories, demand went past pre-Covid levels. While demand recovery is expected to continue in the coming quarters, inflation could act as a spoiler.

During the period, the company’s standalone revenues from operations grew 11% year-on-year to Rs 12,516 crore, while net profit rose 9% to Rs 2,187 crore. The underlying volume growth was 4%. In the first half of the fiscal, the company’s sales rose 12% to Rs 24,266 crore while net profit was up by 9% to Rs 4,248 crore. Commenting on the demand situation, Sanjiv Mehta, chairman & managing director, HUL, said, “Historically, 60-70% of our growth comes from volumes. When inflation is high, the equation changes. Our endeavour has been to focus on savings to ensure consumers stay with the franchise. Looking forward, we remain cautiously optimistic about demand recovery.”
The company reported broad-based growth across 85% of the portfolio, as market-share and penetration increased. The home care division grew 15% driven by high double-digit growth in fabric wash, personal care grew 10% led by skin care, colour cosmetics and hair care. The foods division grew 7%, following last year’s strong growth during the quarter. However, health drinks volumes grew in double digits and continued to gain penetration sequentially. Ice-creams too recovered strongly to pre-pandemic levels.

On the back of steady demand, the company was able to take price hikes without denting consumer sentiment. Despite a sharp increase in raw material costs, the company reported an operating margin of 25%. The company’s operating margin was up 70 basis points sequentially. Focus on savings enabled HUL to manage inflationary pressures and deliver on margins. The company’s CFO, Ritesh Tiwari, said that the next few months would remain critical to get a better understanding of underlying demand, which would depend on normalisation of economic activities, onset and intensity of winter and impact of inflation.

While the company expects growth momentum to continue, inflationary pressures could impact demand going ahead. The unprecedented increase in raw material costs continues to be an overhang for the company. In a bid to balance the volume and value equation, HUL has taken calibrated price hikes in select categories and lowered grammage in other cases where it did not make sense to hike prices. Going forward, the it expects inflation to remain elevated and gross margins are expected to remain under pressure. Tiwari said that judicious pricing actions coupled with cost agility and savings programmes would continue.

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