Captain Speaks     

Published: december 31, 2023
Updated: december 31, 2023

Hindustan Unilever (HUL)

Festival tailwinds will boost demand

Sales of the personal care segment rose by 4.97 per cent to Rs 5,873 crore - accounting for 37.59 per cent of total sales. Sales of the food segment rose 2.6 per cent to Rs 3,851 crore - accounting for 24.65 per cent of the total sales, and sales of the 'others' segment went down 9.3 per cent to Rs 591 crore, accounting for 3.78 per cent of total sales.

Profit before interest, tax and other unallowable items jumped 9.14 per cent to Rs 3,500 crore, while the EBITDA margin increased by 130 bps YoY to 24.6 per cent. The company has reported a 3.8 per cent YoY rise in its standalone net profit at Rs 2,717 crore, as against Rs 2,616 crore in the corresponding quarter a year ago. The reported numbers include a one-off credit from a favourable resolution of past indirect tax litigation. This benefited reported turnover and PAT growth by 1 per cent and 4 per cent respectively.

'MORE COMPETITION'

Commenting on the results, Mr Rohit Jawa said, "We delivered resilient and competitive growth while stepping up our EBITDA margin in a challenging operating environment marked by subdued rural demand and heightened competitive intensity. Looking forward, we remain cautiously optimistic." The CEO further said that FMCG demand is likely to continue a gradual recovery with tailwinds from the upcoming festive season, sustained buoyancy of services, and the government's thrust on capex.

"At the same time, we need to be watchful of volatile global commodity prices as well as the impact of the monsoon on crop output and reservoir levels. In this context, our focus is to provide superior value to our consumers, drive competitive volume growth, and invest in our brands. We remain confident of the mid-to-long-term potential of the Indian FMCG sector and HUL's ability to deliver consistent, competitive, profitable, and responsible growth."

According to Mr Tiwari, in Q2 FY24 growth was led by urban, while rural remained subdued. The company clocked volume growth of 2% YoY. The management expects rural recovery to remain gradual. Volumes in the rural market declined 1% on a twoyear CAGR basis, while urban volumes increased by 3% on a twoyear basis

RURAL DEMAND

Going ahead, the management sees moderating inflation and the government's focus on increasing capex, resulting in more disposable income in the hands of rural India. This can boost rural volumes.

In Q2 FY24, Home Care grew 3%. Fabric Wash volumes grew in the mid-single digit driven by outperformance in the premium portfolio. Household Care recorded high single-digit volume growth led by Dishwash. The company took price reductions in both the Fabric Wash and Household Care portfolios, and stepped up brand and marketing investments to protect its competitive position. During the quarter ended Sept 2023, Beauty & Personal Care grew 4% YoY. Skin-cleansing declined as price cuts offset low single-digit volume growth. Lux and Hamam continue to outperform. Hair Care registered high single-digit growth led by Clinic Plus and Indulekha.

In Q2 FY24, Skin Care and Colour Cosmetics recorded double-digit growth led by outperformance in Ponds and Vaseline. There were focused interventions in new demand spaces to fuel growth. Oral Care recorded mid-single digit growth led by Closeup. Key launches in this quarter include a new range of Vaseline moisturizers, Lakme serums and cosmetics, Pond's serum, Indulekha Anti-Dandruff Oil and Shampoo.

In Q2 FY24, Foods & Refreshment grew 4% YoY. Tea delivered modest growth as the category continued to witness consumers downgrading. Coffee grew in double digits driven by pricing. Health Food Drinks delivered price-led mid-single digit growth driven by activations and innovations. The Foods segment grew in mid-single digit on a high base. Food Solutions, Mayonnaise and Peanut Butter continue to deliver strong growth. The Ice Cream segment clocked mid-single digit growth on a high base. During the quarter, Horlicks Strength Plus, Slow Churn Ice Cream and new blends of Lipton Green Tea were launched.

SMALL SETBACK

The company indicated resurgence of small players in select categories. The company lost some marketshare in the mass end of the segment, which is on account of the pricequality equation. The company is witnessing resilient consumer behaviour in urban metros. There are many categories on the premium side where there is a lot of opportunity. Going forward, the company expects tailwinds from a better festive season. HUL remains focused on driving volume growth. The board declared an interim dividend of Rs 18 per equity share of the face value of Re 1 each for the financial year ending March 31, 2024. The record date for the interim dividend was fixed as Thursday, November 2, 2023, and dividends were to be paid to shareholders on or after Thursday, November 16, 2023.