HUL Q2 net rises 22% to ₹2,670 crore

FMCG major Hindustan Unilever Limited (HUL) posted a 22.36 per cent consolidated net profit for the quarter ended in September.

The Mumbai-based company clocked ₹2,670 crore net profit during the quarter against ₹2,182 crore in the same quarter last year. Sequentially, the net profit was up 11.66 per cent compared with the first quarter profit at ₹2,391 crore.

Revenue from operations grew 16.44 per cent to ₹15,253 crore during the reporting period (₹13,099 crore). The company reported underlying volume growth of 4 per cent against 6 per cent in the previous quarter.

HUL declared an interim dividend of ₹17 per equity share for the financial year ending March 31, 2023.  

Hit by inflation

The company noted that palm oil prices have decreased but the company’s operation continues to be impacted by inflation with net inflation at 22 per cent.

“In H1 2022-23, we have added an incremental turnover of more than ₹4,000 crore. The demand environment remains challenging with inflation impacting consumption. With softening of prices of some commodities and monetary/fiscal measures taken by the government, we are cautiously optimistic in the near term. In this scenario, we will manage our business with agility, and continue to grow our consumer franchise whilst maintaining our margins in a healthy range. We remain confident of the medium- to the long-term potential of the Indian FMCG sector and HUL’s ability to deliver consistent, competitive, profitable, and responsible growth,” said Sanjiv Mehta, CEO and Managing Director.

While the company said that the digital demand for the products is over 20 per cent over its Direct-to-Consumer and e-commerce platforms, the growth in market shares of its products across portfolios has been more than 75 per cent.

“September quarter was better than the last two quarters and the demand for the products in September month was good. We will understand the demand and growth only post-Diwali. Premium brands are growing faster than popular brands while popular brands are growing faster than mass products. Value packs have also seen growth,” said Mehta while speaking to the media.

Price hikes

On price increase, the company stated that the geopolitical situation will determine the course. “The impact on the prices and products also depends on the oil, gas price increase or drop and the geopolitical crisis. The December quarter will have a lower net material impact as palm oil prices have come down,” he said.

The company stated that the food, icecream, and coffee businesses have witnessed double-digit growth, while the tea business has seen a 12 per cent growth. “In the tea business, we have taken price reduction. We compete with players at the bottom of the pyramid as well. We converted the unorganised area to branded tea,” said Mehta while responding to a query on the food and refreshments growth.

On the merger and acquisition of smaller companies, HUL stated they would opt for a strategic fit, “We are not concerned with other players and we go for a merger only when there is a strategic fit and at the right price,” added Mehta.

“The quarter saw high-priced inventory come into the system which led to sharp gross margin slippage of 580 bps YoY to 45.8 per cent. EBITDA margins at 22.9 per cent were managed due to a cut in ad spends (250 bps) and lower other expenses (180 bps). We expect inflationary pressure to have peaked out and expect sequential margin recovery. We will revisit our numbers post-earnings call,” said Amnish Aggarwal, Head of Research, Prabhudas Lilladher Pvt Ltd.