Q1 Results: HUL’s Volume Growth Falls To Lowest In Seven Quarters
Kissan brand jams, made by Hindustan Unilever (Photographer: Prashanth Vishwanathan/Bloomberg News)

Q1 Results: HUL’s Volume Growth Falls To Lowest In Seven Quarters

Hindustan Unilever Ltd.’s volumes grew at the slowest pace in seven quarters amid a slowdown in consumption in the economy.

Its net profit rose 15 percent year-on-year to Rs 1,755 crore in the quarter ended June, the country’s largest consumer goods maker said in an exchange filing. That met the Rs 1,716-crore consensus estimate of analysts tracked by Bloomberg.

Revenue rose 6.6 percent over the last year to Rs 10,114 crore, also in-line with the Rs 10,171-crore estimate. HUL reported a volume growth of 5 percent as of June— the lowest since the third quarter of 2017-18.

The fall in volume growth is on account of base effect of the goods and services tax rate cuts in the previous quarters, Sanjiv Mehta, its chairman and managing director, said in a press conference after the earnings announcement. “It’s not a train wreckage as it is still a pretty decent growth for a company of our size.”

This comes at a time growth of India’s fast-moving consumer goods industry declined for a second straight quarter in the April-June period, according to Nielsen India. A sharp pullback in spending by rural consumers hurt domestic demand for consumer goods makers.

Rural growth was growing anywhere between 1.3 times and 1.5 times the urban growth. But now it has come on par with urban levels.
Sanjiv Mehta, Chairman and Managing Director, HUL 

HUL’s operating income, or earnings before interest, tax, depreciation and amortisation, rose 17.6 percent year-on-year to Rs 2,647 crore. That’s also in line with the consensus estimate of Rs 2,474 crore. Its operating margin expanded 250 basis points to 26.2 percent in the three months to June.

The performance was in line with our expectations but the margin expansion was a surprise, said Nitin Gupta, a research analyst at SBICAP Securities. “The only point of concern in the numbers is the muted growth seen in beauty and personal care segment which accounts for a third of the overall revenue.”

Highlights From The Management:

  • Near-term consumer demand will be subdued and commodity and currency will remain volatile.
  • Rural growth has moderated and is currently growing on par with urban.
  • Margin expansion was driven by leveraging in advertising and other operating expenses.
  • Absolutely bullish on India’s FMCG growth story in the medium to long term.
  • One category which has witnessed moderation in growth is personal wash segment.
  • Impact of crude oil prices has led to selective price hikes in home care category.
  • Planning for a price cut in the rates of Lux and Lifebouy taking into account the budget changes and to spur demand in the category.
  • Next hearing in GST profiteering case is scheduled in August.

Shares of HUL closed 0.8 percent higher ahead of the earnings announcement. That compares with a 0.13 percent fall in the benchmark Nifty 50 Index.

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