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Fast moving consumer goods major Hindustan Unilever (HUL) has posted a double-digit volume-led growth in the quarter ended June 30.
The company's net profit and sales also beat market expectations in the first quarter of the fiscal 2018-19 on the back of improved consumer demand even as the impact of demonetisation and GST (Goods and Services Tax) bottomed out.
The company, which manufactures branded products such as Ponds, Lux, Surf, Dove and Brooke Bond, posted a net profit of ₹1,529 crore during the quarter which was about 19 per cent higher than ₹1,283 crore in the year-ago period.
Sales grew 3 per cent at ₹9,356 crore in the April-June quarter from ₹9,094 crore in the corresponding period last year.
Sanjiv Mehta, Managing Director and CEO, said that the company has posted a quarter with strong double-digit growth and a strong underlying volume growth of 12 per cent across all the segments.
Crude oil prices
While he said there has been a gradual improvement in demand, both in rural and urban markets, he sounded caution about the rising crude oil prices and inflationary concerns.
Crude oil prices have increased by 40 per cent in the last one year.
However, the price of vegetable oil, which the company uses in many of its products, has softened. “Going ahead, crude oil will definitely be a concern and will impact the margins. It has happened in this quarter and will also impact margins in the coming quarters, but we will look at various levers on how to manage that (margins)," Mehta said, adding that the company will have a look at the entire product portfolio and then take a call on price revision.
Mehta added that inflation has already impacted the home-care segment and the company has started taking judicious pricing.
Despite that, home-care has outperformed personal care in the last two quarters.
Despite the inflationary challenges and the depreciating rupee, Mehta said the company has not shied away from investing in market development or in the advertisement and promotional spends.
HUL's ad spends during the quarter went up by 21 per cent.
Rural growth picking up
On the rural market, Mehta said rural growth has started picking up and is growing faster than the urban market, but the company will have to wait for a couple of quarters more to understand a clear trend in that.
The company’s scrip climbed as much as 1.5 per cent to a record high of ₹1,768.80 on Monday.
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