With the decrease in covid cases, a rapid vaccination campaign and improved mobility, the company has reported a visible increase in demand for discretionary categories such as skin care, colored cosmetics, detergents and ice cream.
However, the company reported moderation in growth rates in the rapidly changing consumer goods industry during August and September, particularly in rural markets, citing data from researcher Nielsen. Consumer confidence remains subdued, he said, while commodities continue to be at “high levels”.
The profit for the three months ended September 30, 2021 amounts to ??2,187 crores, compared to ??2,009 crore reported over the period last year, representing growth of 8.8%. Estimates from 10 brokerage firms set autonomous quarterly profit at ??2,195.40 crores.
The maker of Rin detergent and Lux ââsoaps reported sales of ??12,724 crore for the quarter, up 11.2% from ??11,442 crores posted a year ago. This was above street estimates which provided for Rs12,660 crore in revenue.
Growth was driven largely by price growth rather than volumes, as the company made price increases calibrated to avoid high inflation.
The performance was broad, with all three divisions of the country’s largest consumer packaged goods company âgrowing competitivelyâ.
The company reported underlying volume growth of 4% in the quarter. In the period of the previous year, its volume growth was 1%. However, sequentially, volume growth slowed: HUL saw volume growth of 9% in the last quarter (June quarter of this year).
âThe September quarter saw a sequential improvement in trading conditions, although it remained difficult with unprecedented levels of input cost inflation and subdued consumer sentiment. Against this backdrop, we delivered strong performance with double-digit revenue growth and sequential increase in profitability, âsaid Sanjiv Mehta, President and CEO of HUL, in a statement.
Mehta said calibrated price increases and a laser focus on savings have helped the company protect its business model while ensuring the right price-value equation for consumers.
“We remain cautiously optimistic about the recovery in demand,” he said.
The results come as mobility improves in India. Consumers are retreating, leading to demand for more discretionary categories such as personal care products and those related to out-of-home consumption. This after a more serious wave of covid-19 infections that plagued consumer spending during April and May.
The company’s home care brands grew 15% on strong double-digit growth in fabric washing. âHome care continued to perform well and developed on a solid basis. Liquid and textile sensations continue to outperform. Calibrated price increases have been applied to all fabric washing and housekeeping portfolios to partially offset the high inflation in input costs, âhe said in his results report.
Meanwhile, the beauty and personal care category grew by 10%, led by skin care, color cosmetics and hair care products. The segment represents 40% of the company’s domestic activity. âSoaps have experienced strong growth thanks to strong growth in the beauty and premium segment. A calibrated approach to increasing prices has helped protect the business model, as vegetable oil prices remain at high levels, âthe company said.
At the same time, sales growth for the food and refreshment portfolio increased by 7% in the September quarter.
Analysts who follow the company said volume growth in the quarter was “dampened” to 4%, while the sharp rise in commodity prices led to stronger price growth of 7% in the quarter. , said ICICI Direct Research in a note.
Abneesh Roy of Edelweiss Securities said the main volume laggers were sanitation and hygiene products, except food and tea. âMost of them were due to a high base effect from the previous quarter or a sharp rise in prices,â he said.
The company has suffered aggressive price hikes over the past six months with high inflation in palm oil and crude packaging costs, ICICI analysts said. Despite the price increases, gross margins contracted by 140 basis points, they said.
The company said it continues to see unprecedented levels of inflation in key inputs. Freight rates, especially ocean freight, have increased severalfold, said Ritesh Tiwari, chief financial officer of HUL. Inflationary conditions are expected to persist in the short term, he said.
The company is however confident to navigate in this environment.
âWe continue to dynamically manage all lines of our P&L, have a strong savings program and use net income management principles to take calibrated and sound pricing options,â he said.
In its earnings presentation, the company said rural growth rates for the FMCG market slowed significantly during August and September.
Mehta said rural demand has held up in recent quarters in part due to reverse migration and government-backed programs.
âThe government helped with the task in terms of direct money transfer, food subsidy, MNREGA expenses and the harvests were decent (in rural areas). The basis for the rural is certainly much higher in terms of the growth rate compared to the urban. The urban area has been impacted due to the lack of mobility. As mobility improves, urban demand is expected to increase, modern commerce has opened up, âMehta told reporters at a virtual press conference.
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