The gradual unlocking across the country has benefitted Hindustan Unilever (HUL) in the quarter ended September, with the company recording a domestic volume growth of 1 per cent (excluding recently merged GSK Consumer and VWash) year-on-year.

Earlier, in both the March and June quarters, volumes had dropped by 7 per cent year-on-year for the company. While FMCG players with a larger ‘foods’ portfolio did well during the March and June quarters, HUL lost out due to the tilt in product mix towards beauty & personal care (about 40 per cent of total revenues) as well as home care products (30 per cent of total revenues). These two segments continue to show contraction in revenues in the current quarter too, in comparison with the corresponding period last year.

However, offtakes seem to be showing improvement. Segmental revenues in beauty & personal care, for instance, have dropped only by 0.2 per cent year-on-year now, compared with the steeper 12 per cent year-on-year fall seen in the three months ended June. Skin cleansing and hair care products have shown a pick-up in demand here. While laundry products faced the heat in the home care segment, home cleanser brands such as Domex has helped shore-up performance. Hitherto restricted to the southern markets, HUL has taken the Domex brand national now, thanks to the opportunity created by the pandemic. These factors imply that the worst of the volume contraction due to the pandemic could be over for the company.

Also read: HUL’s net profit jumps 8.58% to ₹1,974 cr in Q2

Margins expand

Cost control efforts through reduced advertising spends was evident across FMCG players in the June quarter. But the spends seem to be making a comeback, as companies strive to push sales, now that production and supply operations are back to normal. HUL’s ad spends, as a percentage of sales, stood at 10 per cent in the three-months ended September. While this is still lower than the 12 per cent recorded a year ago, it is much higher than the 7 per cent recorded in the June quarter. Despite the higher ad spends and spike in prices of palm oil ( raw material) and tea, operating margin has expanded by 30 basis points year-on-year to 25 per cent now. The company has been able to pass on some of the cost increases to consumers in the form of price hikes especially in tea. Also, GSK Consumer’s nutrition products have a higher margin profile, and thus help cushion the profitability for HUL. However, despite the 16 per cent increase in sales to ₹11,276 crore, profits grew only by 8.7 per cent to ₹2,009 crore due to higher tax expenses. The tax expenses was lower in the base period due to cut in corporate tax rate.


The HUL stock has corrected 16 per cent from the one-year high of ₹2,614 it touched in early April. With demand slowly gaining colour, the stock may see better days ahead. However, rich valuation may restrict the upside. It trades at 75 times its trailing 12-month earnings.