HUL Q1 Results: Profit Misses Estimates, Margin Contracts
A file photograph of a bottles of Hindustan Unilever Ltd. Pond’s beauty products are displayed for sale at a store in Mumbai, India. (Photographer: Kuni Takahashi/Bloomberg)  

HUL Q1 Results: Profit Misses Estimates, Margin Contracts

Hindustan Unilever Ltd.’s first-quarter profit missed estimates and its margin contracted on higher raw material costs.

Net profit of India’s largest consumer goods maker fell 3.7% sequentially to Rs 2,070 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 2,211.3-crore consensus forecast of analysts tracked by Bloomberg.

The company’s volume rose 9% over a year earlier in the first quarter, a period of local lockdowns to contain the second wave of the pandemic. It compares with a contraction of 8% a year earlier when the nation was under a complete lockdown. Volume growth, however, slowed sequentially. Domestic sales grew 12% over a year earlier.

Although renewed restrictions in India impacted the market in the second quarter (April-June), they were less severe than in the same period last year, parent Unilever Plc. said in its half yearly commentary. Tea grew at high single digits, led by price increase in India as a result of raw material inflation.

HUL Q1 Highlights (QoQ)

  • Revenue from operations fell 1.8% to Rs 11,915 crore against an estimated Rs 12,168.4 crore.

  • Operating profit fell 3.86% to Rs 2,847 crore.

  • Margin contracted sequentially to 23.9% from 24.4%.

Overall growth was driven by its premium portfolio. HUL increases prices of its tea, skin cleansing and laundry products during the quarter.

"We are in the thick of the season for tea and palm (oil). Over the next couple of months, we will have to see ... production of these commodities, which will later show us the kind of pricing we will see," Ritesh Tiwari, chief financial officer at HUL told reporters in a post-earnings briefing. "As of now these (tea and palm oil) are at multi-year highs. Our first strategy is to undertake cost-saving measures ... [and then] we do take judicious price increases."

Tiwari said the company will need to navigate the next couple of quarters of "very high inflation".

Sanjiv Mehta, chairman and managing director at HUL, said in the earnings statement, "In a challenging environment, we have delivered a strong performance across top line and bottom line."

The maker of Lux soap saw a gradual recovery in demand from June onwards and it's back at March levels in July, Tiwari said.

"Rural demand which was impacted during the second wave has recovered and is now growing ahead of urban," he said. "Demand from the modern trade channel was impacted due to restricted mobility."

Shares of HUL fluctuated after the results were announced. The stock gained as much as 3% before paring gains and is trading 2.17%, lower compared with a 0.9% gain in the benchmark Nifty 50.

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