HUL beats Street expectations in Sept quarter, net profit rises 22.2%

Hindustan Unilever (HUL) — one of the country’s largest fast-moving consumer goods (FMCG) majors — registered a 22.2 per cent year-on-year (YoY) increase in net profit in the July-September quarter (Q2), beating Street expectations despite sustained weakness in rural markets.

The company registered a volume growth of 4 per cent during the quarter. While the net profit rose to Rs 2,665 crore from Rs 2,181 crore in the year-ago period, revenue increased 16.1 per cent to Rs 15,144.0 crore, as against Rs 13,046.0 crore during this time.

Sanjiv Mehta, MD and CEO, HUL, said in a conference call, “According to Nielsen, the total market value has grown 7 per cent, whereas we have grown at 16 per cent.”

“When you look at the volumes, while the market has declined 6 per cent, we grew 4 per cent,” Mehta added.

In the September quarter, the FMCG market value for categories HUL operates in grew in mid-single-digits with urban growing ahead of rural, Ritesh Tiwari, HUL’s chief financial officer, said in the company’s post-results press conference. “As we anticipated, almost all commodities, barring palm oil, continue to remain at significantly elevated levels,” Tiwari said, adding that inflation was still a significant challenge for the industry, though some commodity prices have eased.

He said in the near term, the company was “cautiously optimistic that growth will continue to be price-led”.

During the quarter, the company saw its PBIDT (profit before interest, depreciation and tax) rise 9.4 per cent to Rs 3,588 crore.

HUL’s home care category grew 34 per cent, while beauty and personal care segment saw an 11 per cent growth. “Home care delivered 34 per cent growth… Both fabric wash and household care grew in high double digits with all parts of the portfolio performing well,” the firm said in its press release.

HUL’s food and refreshments category grew 4 per cent in Q2, driven by performance in food, coffee and ice cream.

Mehta said moderation of commodity prices will cause volumes to increase. “If we look at the net material inflation (NMI), it was 22 per cent in the quarter, which is pretty significant.

Once that starts going down, the manufacturer or the market has to start passing down the benefit of lower commodity prices and that’s when we will see volumes going up,” Mehta said.

Due to a correction in palm oil prices, the company has started reducing prices of soaps. Mehta said the company was quick to pass on the benefit to the consumer. On demand, Mehta said September was better than the previous two months in the last quarter.