HUL’s Rohit Jawa: Consumer Markets Show Recovery as Household Goods Maker Sees Strong Results

Mumbai: Hindustan Unilever Ltd (HUL), a leading consumer goods company, reported signs of recovery in rural markets with strong sales of low-priced packs and good performance in categories like hair care and soaps.

CEO Rohit Jawa said the monsoon’s positive trend and recent government measures to invest in the rural economy could boost consumption in rural India. HUL’s earnings report coincided with the announcement of the Union budget.

Monsoon’s Importance

“Monsoon is crucial for agriculture and the rural economy, and it looks promising. We are hopeful about the signs of recovery and will keep strengthening our presence in rural areas,” said Jawa during a virtual press conference.

HUL’s first-quarter performance showed the benefits of transforming its portfolio into high-growth areas, supported by a gradual rural market recovery.

HUL’s net Profit

For the quarter ending June 30, HUL’s net profit increased by 2.6% to ₹2,538 crore from ₹2,472 crore last year. Sales rose by 1.26% to ₹15,339 crore from ₹15,148 crore, driven by price reductions as the company passed on lower commodity prices to consumers.

Total expenses for the quarter increased by 1.5%, with the company spending more on advertising, which went up by 11% year-on-year.

Analysts Prediction

Analysts had expected a profit of ₹2,560 crore and revenue of ₹15,325 crore, according to a survey.

HUL reported a 4% volume growth in the June quarter, slightly up from the previous quarters’ 2%.

Jawa mentioned that market growth in rural areas has been ahead of urban areas recently, despite rural growth lagging behind urban over a two-year period. He highlighted that the company’s rural-focused products, like hair care and low-priced packs, have shown positive volume growth.

Gross Margin

Gross margins for HUL expanded to 50.9% year-on-year but slightly contracted compared to the previous quarter.

The company’s personal care portfolio saw low single-digit volume growth, while sales declined by 5% year-on-year. Home care products like fabric cleaners and detergents reported a 4% increase in quarterly sales and high single-digit volume growth. Foods and refreshments had a 1% sales growth with stable volumes. The Beauty and Wellbeing segment, which includes brands like Sunsilk, Clinic Plus, and Dove, reported a 3% increase in sales.

During the quarter, HUL relaunched its Vim bar and Ponds personal care products.

Stabilizing the Prices

HUL plans to stabilize prices after making several adjustments due to changes in commodity prices. CFO Ritesh Tiwari said the company expects no significant price changes in the short term if commodity prices remain stable.

The Volume Growth

Analysts were pleased with the 4% volume growth, considering the challenging conditions. Abneesh Roy from Nuvama Institutional Equities said the growth exceeded expectations and praised the company for managing costs and increasing advertising spend.

Jefferies analysts noted that HUL’s performance in the June quarter slightly exceeded their estimates with better volume growth, although gross margin expansion was below expectations. They anticipate no significant pricing contribution to growth this year and expect EBITDA margins to remain flat.