Hindustan Unilever posts strong Q2 results despite slow demand

The company said it was "cautiously optimistic" about demand recovery on the back of festive season tailwinds, but needs to remain watchful of global commodity prices
Hindustan Unilever posts strong Q2 results despite slow demand

Hindustan Unilever Limited (HUL), India's largest fast-moving consumer goods (FMCG) company, reported a 4% underlying sales growth during the second quarter of the year, boosted by a 2% increase in volumes amid a challenging macro environment marked by rural slowdown and high competitive intensity.

On the profitability front, Gross Margins expanded by 700 basis points compared to last year as input costs cooled off. The company also increased Advertising and Promotions spend by 4.2 percentage points to support brands. EBITDA margin at 24.6% expanded by 130 bps.

Profit After Tax before exceptional items grew 12% to Rs. 2,668 crores while reported Profit After Tax was up 4% at Rs. 2717 crores. The difference in growth rates is largely due to higher prior period tax credits last year.

HUL also announced an interim dividend of Rs. 18 per share.

Commenting on the results, HUL CEO and Managing Director Rohit Jawa said: "We delivered a resilient and competitive growth whilst stepping up our EBITDA margin in a challenging operating environment. Going forward, we remain cautiously optimistic about demand recovery on the back of festive season tailwinds, buoyancy in services and government capex push. However, we need to remain watchful of global commodity prices and monsoon impact."

"Our focus remains on providing superior value to consumers, driving competitive volume growth and investing behind brands. We are confident of the mid to long term potential of Indian FMCG sector and HUL's ability to deliver consistent, competitive and profitable growth," he added.

Home Care segment grew 3% driven by mid-single digit volume growth in Fabric Wash and high single digit growth in Household Care. Market leader brands like Surf Excel and Vim continued to perform well. HUL took further price reductions in this segment to provide value to consumers.

Beauty and Personal Care grew 4% with mid-single digit volume growth, led by strong performance in Skin Care, Colour Cosmetics, Hair Care and Oral Care. Popular brands like Lux, Clinic Plus and Closeup saw robust growth. Key launches during the quarter include new variants under Vaseline, Lakme, Pond's and Indulekha.

Foods and Refreshment grew 4%, driven mainly by pricing actions. While Tea witnessed consumers down-trading, Coffee grew in double-digits. Packaged Foods like Knorr and Ice Creams also grew at mid-single digit rates on a high base. New variants were launched under Horlicks, Lipton and Slow Churn ice creams.

The HUL stock closed flat at Rs. 2550 on the NSE ahead of the earnings announcement.

The results are largely in line with street expectations. The company is seen as a good proxy for overall consumer sentiment in India.

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The New Indian Express