Unlock 1.0: HUL ramps up production but expects short-term impact on profitability

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Published: June 3, 2020 2:50 AM

However, with mobility restrictions, lockdown of retail spaces and fear of loss of income, the impact on discretionary categories like hair care, skin care and colour cosmetics is more accentuated.

The company said it is operating with shorter planning cycles, stepping up agility, reducing complexity and working longer shifts to build resilience in its supply chain.The company said it is operating with shorter planning cycles, stepping up agility, reducing complexity and working longer shifts to build resilience in its supply chain.

Hindustan Unilever (HUL) said on Tuesday that the company was able to ramp up its production to 80-90% of its normative levels compared to about 70% in the month of April. However, there will be some impact on profitability in the short term.

The company said it is seeing heightened consumer focus on health, hygiene and nutritional needs. Its portfolio comprising of categories like skin cleansing, home & hygiene, nutrition, tea, coffee and foods “is well positioned to cater to these consumer demand spaces”.

However, with mobility restrictions, lockdown of retail spaces and fear of loss of income, the impact on discretionary categories like hair care, skin care and colour cosmetics is more accentuated. “While we are seeing some demand revival in these categories, the exact time which these categories will take to recover fully remains to be seen. Our out-of-home businesses comprising of ice creams and foods solutions and our consumer durables business of water have been most severely impacted by the lockdown”.

The company said it is operating with shorter planning cycles, stepping up agility, reducing complexity and working longer shifts to build resilience in its supply chain. All of HUL’s factories and all the warehouses except one in Assam are now operational.

HUL said that the future impact on the business operations is difficult to assess at this point, as the situation is unravelling at a fast pace. “Even though the current situation is very volatile, we are confident about our ability to manage the crisis and come out of it in a strengthened position,” the company said in a BSE filing.

As for the financial implications of the pandemic, the company said there will be some impact on the profitability in the short term; however it expressed difficulty in assessing the exact quantum at this stage. “We are systematically reviewing all sensitivity; confidential areas of cash generation and usage and re-evaluating all costs in the prevailing circumstances, so that we can continue to invest towards the best opportunities,” HUL said in the filing.

On the GSK Consumer Healthcare merger, the company said the merger of GSK Consumer Healthcare India with Hindustan Unilever is effective April 1, 2020 consequent to receipt of all approvals. “The workmen at our Nabha plant are currently on a strike. We are working with all stakeholders to find a resolution and will take appropriate steps as required”.

Regarding giving an update on the merger and the synergy benefits, now that it is complete, the company hopes to do so in July, as given the Covid-19 crisis, all efforts are currently focussed on bringing operations back to normalcy.

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