 "Hindustan Unilever")
Hindustan Unilever (HUL), India’s largest fast-moving consumer goods (FMCG) company, on Thursday reported a marginal decline in consolidated net profit for the quarter ended September 30, 2023 (Q2FY24), compared to the year-ago period, amid subdued rural demand.
The firm logged a net profit of Rs 2,656 crore in the second quarter, down 0.3 per cent from Rs 2,665 crore posted a year ago. Revenue, on the other hand, rose 3.1 per cent year-on-year (Y-o-Y) to Rs 15,364 crore. Sequentially, HUL’s revenue grew by 0.6 per cent and net profit by 4 per cent. According to Bloomberg, analysts had pegged HUL’s revenue at Rs 15,577 crore and net profit at Rs 2,609 crore for Q2FY24.
Other FMCG majors Nestlé and ITC, which also announced their financial results for Q2 on Thursday, posted mixed sets of numbers. While Nestlé India reported a 37.3 per cent Y-o-Y jump in consolidated net profit to Rs 908 crore on the back of consistent performance of all major brands, ITC’s earnings rose only 6 per cent annually to Rs 4,898 crore.
Rohit Jawa, chief executive officer and managing director of HUL, said he was “cautiously optimistic” about the future. “FMCG demand is likely to continue a gradual recovery with tailwinds from the upcoming festival season, sustained buoyancy of services and the government’s thrust on capex,” he said.
“At the same time, we need to be watchful of volatile global commodity prices as well as the impact of monsoon on crop output and reservoir levels. In this context, our focus is to provide superior value to our consumers, drive competitive volume growth, and invest behind our brands. We remain confident of the mid- to long-term potential of the Indian FMCG sector,” he added.
HUL said there was a one-off credit from favourable resolution of past indirect tax litigation that benefited both top line and bottom line in the September quarter.
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It registered a volume growth of 2 per cent during the quarter, while profit before interest, depreciation and tax (PBIDT) was up 11.6 per cent Y-o-Y at Rs 3,973 crore.
The company has reduced its product prices over the past 8-9 months following a correction in prices of commodities used by HUL in three-fourths of its business —home care and personal care.
“We are taking prices down as we’ve been doing over the past 8-9 months, and the transition from high to low prices in the market takes time. Volume recovery will be gradual, which is exactly what we are seeing now,” Jawa said.
During the quarter, market volumes grew in high single digits Y-o-Y. “We need to be mindful that this came on a base period where volumes declined to mid-single digit. Hence, cumulatively, market volumes remain largely flat over a two-year period,” Ritesh Tiwari, chief financial officer of HUL, said in a press conference after its results.
Citing NIQ's data (formerly known as NielsenIQ), the management said the FMCG market witnessed 7-8 per cent volume growth during the quarter compared to 5 per cent a year ago.
HUL’s rural volumes continued to remain under pressure in Q2, and the management noted that rural demand remained subdued.
Jawa pointed out that the market was recovering, with the urban market recovering faster than rural.
Earlier, FMCG companies noted in their quarterly updates that they expected a delay in recovery in rural demand due to a delay in monsoon.
The company’s focus continues to remain on driving competitive volume growth, stepping up investments behind its brands and maintaining its Ebitda margins in a healthy range, Tiwari said.
The company continues to witness pressures at the mass end. “When we look at the market share on the whole, we are still holding. We have lost some share of late in the mass end of the segment, which is on account of the price quality equation, and we have adjusted. In some cases, it’s taking time to recover. But that’s really where we have lost because the number of local players that have come in the market has increased,” said Jawa.
