India’s largest FMCG player Hindustan Unilever Ltd posted a consolidated net profit of ₹2,181 crore for the second quarter ending on September 30, a 10.4 per cent increase from a net profit of ₹1,974 crore in the same period last year. The company saw its revenue from operations rise by 11.3 per cent to ₹12,812 crore.

Dip in margins

Margins, however, dipped to 24.7 per cent compared to 25.1 per cent a year earlier. Rising commodity prices in crude, palm oil, packaging and freight front continue to be major headwinds for the FMCG market. Also, while the urban market has seen a major demand revival, the rural market has started to become muted on the demand front.

Sanjiv Mehta, Chairman and Managing Director, said, “The September quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments.” Domestic sales in Q2 grew 11 per cent over a year earlier. Volume growth slowed sequentially to 4 per cent in Q2 compared to 9 per cent in the first quarter.

From a long-term perspective, Mehta believes rural market will see higher growth since per capita consumption in rural continues to be one-third of urban. Despite rising inflation, thus rising commodity prices, the company continues to have healthy EBITDA due to price hikes.

Ritesh Tiwari, chief financial officer, told a post-earnings briefing the company will step up launches in the discretionary category that contributes 15 per cent to its overall portfolio.

Hindustan Unilever is also seeing 15 per cent of demand on its digital channels including the Shikhar app and direct-to-consumer platform.

The company remains cautiously optimistic for the coming months, waiting to see the onset and intensity of the coming winter, normalisation of economic activities, and the impact of inflation on the business.

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