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HUL profit up 9% in Sept quarter, skin care, detergents, ice creams grow

With receding covid cases, a speedy vaccination drive, and improved mobility the company reported a visible uptick in demand for discretionary categories such as skin care, coloured cosmetics, detergents, and ice-creams.  

However, the company flagged moderation in growth rates within the fast-moving consumer goods industry in the months of August and September, especially, in the rural markets, citing data from researcher Nielsen. Consumer sentiment remains subdued, it said, while commodities continue to be at “elevated levels”. 

Profit for the three months ended 30 September 2021 stood at  ₹2,187 crore, compared to  ₹2,009 crore reported in the year ago period—an 8.8% growth. Estimates by 10 brokerages pegged standalone quarterly profit at ₹2,195.40 crore. 

The maker of Rin detergent and Lux soaps reported revenue of  ₹12,724 crore for the quarter, up 11.2% from the ₹11,442 crore it posted a year ago. This was above street estimates that projected Rs12,660 crore in revenues.  

Growth was largely led by pricing growth rather than volumes as the company took calibrated price hikes to ward off steep inflation.  

Performance was broad based with all three divisions of the country’s largest pure-play packaged consumer goods company “growing competitively”.  

The company reported underlying volume growth of 4% during the quarter. In the year ago period its volume growth stood at 1%. However, sequentially, volume growth slowed down—HUL clocked 9% volume growth in the last quarter (June quarter of this year). 

 “September quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments. In this backdrop, we have delivered a strong performance growing top-line in double digits and stepping up profitability sequentially,” Sanjiv Mehta, chairman and managing director, HUL, said in a statement.  

Mehta said that calibrated price increases and laser sharp focus on savings helped the company protect its business model while ensuring the right price-value equation for consumers. 

 “We remain cautiously optimistic about demand recovery,” he said.  

The results come as mobility has been improving in India. Consumers are stepping out driving demand for more discretionary categories such as personal care products and those linked to out of home consumption. This after a more severe wave of covid-19 infections marred consumer spends in the months of and April and May.  

The company’s home care brands grew 15% driven by high double-digit growth in fabric wash. “Household care continued to perform well and grew on a strong base. Liquids and fabric sensations continue to outperform. Calibrated price increases were taken across fabric wash and household care portfolios to partly offset the high inflation in input costs,” it said in its earnings statement. 

Meanwhile—beauty and personal care category grew 10% led by skin care, colour cosmetics and hair care products. The segment drives 40% of the company’s domestic business. “Soaps grew on a high base led by strong growths in beauty and premium segment. calibrated approach towards price increase has helped protect the business model as vegetable oil prices remain at elevated levels,” the company said.  

Meanwhile, sales growth in the foods and refreshment portfolio grew 7% in the September quarter.  

Analysts tracking the company said volume growth during the quarter was “muted” at 4% whereas steep increase in raw material prices resulted in sharper pricing growth of 7% during the quarter, said ICICI Direct Research in a note. 

Abneesh Roy at Edelweiss Securities said that key laggards in volumes were sanitation and hygiene products apart from food and tea.  “Most of these were due to high base effect of the previous quarter or sharp price hike,” he said. 

The company has taken aggressive price hikes in last six months with steep inflation in palm oil and crude based packaging cost, analysts at ICICI said. Despite price hikes, gross margins contracted by 140 bps, they said. 

The company said it continues to see unprecedented levels of inflation in key input materials. Freight rates, especially, the ocean freight has increased multi-fold, said Ritesh Tiwari, Chief Financial Officer, HUL. Inflationary conditions are expected to persist in the near term, he said. 

The company is however confident about navigating this environment.   

“We continue to dynamically manage all lines of our P&L, have a robust savings program and use net revenue management principles to take calibrated and judicious pricing options,” he said. 

In its earnings presentation the company said that rural growth rates for the FMCG market cooled down significantly in the months of August and September.  

Mehta said rural demand has been resilient over the last few quarters partly due to reverse migration and government-backed schemes.  

“The government helped the task in terms of direct transfer of money, the food subsidy , the MNREGA outlay, and the harvests have been decent (in rural). The base for rural is certainly much higher when it comes to growth rate as compared to urban. Urban was impacted because of lack of mobility. As the mobility improves the urban demand should be picking up, modern trade has opened up,” Mehta told reporters over a virtual press meet.

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