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Hindustan Unilever Limited (HUL) on Friday posted a 12.95 per cent increase in consolidated net profit to ₹1,631 crore for the third quarter ended December 31, 2019, driven by a margin improvement and sustained volume growth.
The FMCG major had posted a consolidated net profit of ₹1,444 crore in the year-ago period. Domestic consumer growth was 4 per cent with the underlying volume growth at 5 per cent, HUL said in a regulatory filing.
HUL is also looking at undertaking a price hike “in a staggered manner” in the soap category by March, said Srinivas Phatak, CFO, HUL, addressing reporters post the result announcement. The price increase will be by 5-6 per cent for now, he said.
Sanjiv Mehta, Chairman and Managing Director, HUL, said that this is driven by a “massive increase” in costs, citing the example of an increase in vegetable oil prices, which will be up by 25-30 per cent moving into the next quarter, compared to the year-ago period.
‘Resilient performance’
Mehta said: “This quarter witnessed an overall challenging market environment, mainly reflecting a sharp slowdown in rural and discretionary spends. In this tough environment, HUL has delivered a resilient performance which is reflective of the strength of our brands, consistency in strategy and execution prowess.”
He added, “Our continued focus on innovation and market development has helped sustain underlying volume growth at a steady 5 per cent. We have also delivered a healthy margin improvement.” Mehta said that in the short term, demand outlook and market growth will remain challenging.
Revenue from operations during the quarter under review was up 3.87 per cent at ₹9,953 crore, from ₹9,582 crore recorded in the corresponding quarter last year. Total sales grew by 4 per cent during Q3 of this fiscal, while domestic consumer business grew by 4 per cent, it said. In terms of sales growth, the home care segment grew by 10 per cent, the foods and refreshment segment by 8 per cent, while the beauty and personal care segment showed a decline of 1 per cent.
Personal care segment
The beauty and personal care segment was impacted by a higher than expected slowdown to market growth and delayed winter, the company said. HUL’s margin expansion was driven by its savings agenda and leverage in other expenses, it said.
While the volume growth for the market has been at around 2 per cent, HUL’s volume growth this quarter has been 5 per cent. Mehta attributed this to the “strength of the brand”, as well as the strategy followed by the company in identifying places where slowdown is severe, such as Punjab, Haryana, and West Bengal.
Talking about the Budget, Mehta said that he would want measures to put more money in the hands of consumers as well as to boost consumer confidence. “It is not a doomsday scenario,” he added.
“Our confidence in India has not been dented at all. We are very optimistic, we believe the mid to long term story of India, there is no question about that,” said Mehta. He said that HUL has not changed its strategy too, as it keeps rolling out innovations and engaging in market development work.
“I remain confident of the medium to long term prospects of Indian FMCG sector and am hopeful that policy measures will spur the rural economy and drive consumption,” said Mehta.
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