HUL: HUL net profit declines due to weak demand
Unilever India unit’s net profit in the March quarter fell to ₹2,406 crore from ₹2,552 crore a year ago, below analyst estimates. Revenue was little changed at ₹14,693 crore compared to ₹14,638 crore a year ago.
agency ‘Below street expectations’
For the fiscal year ended March, the company posted a 3% rise in revenue to ₹59,579 crore and net profit of ₹10,114 crore, up 2%. The company has proposed a final dividend of Rs 24 per share.
“We want to grow faster,” HUL managing director Rohit Jawa said after the earnings call on Wednesday. “There’s not a lot of price in the market for anyone. Once prices recover, we’ll get back to the trend pace and hit that topline and others will do the same. Rural areas are improving and that growth will come back to us. “
The maker of Rin detergent and Lux soap said sales, or number of products, rose 2% in the fiscal fourth quarter, meaning growth was driven entirely by demand rather than price increases. HUL’s performance is seen as representative of broader consumer sentiment in India.
“What we can do is drive growth at a competitive scale,” Jawa said. “The market is growing, but it’s not evenly distributed.”
The company said it expects marginal price increases only by the end of the current fiscal year. Additionally, while rural demand is gradually recovering, urban markets remain ahead on a two-year compound annual growth rate basis.
During the quarter, home care, its largest segment, which includes brands such as Surf and Domex, grew revenue by about 1%, with volume up about 5%. HUL’s beauty and personal care business, which saw the highest price reductions and basis volume increases, declined 2 per cent, while food and refreshments rose 4 per cent in value terms, although sales were the same for both segments.
Over the past decade, household brands have increasingly relied on rural India for sales, where purchasing behavior is largely linked to farm output.
“Overall, inflation in the fast moving consumer goods (FMCG) market has been quite high,” Jawa said. “So, it is taking some time for rural consumers who have had to adjust their consumption and more discretionary categories, more adequacy. But we are putting all that behind us and entering a better phase and a better monsoon will also help the agricultural economy. “
Analysts said HUL’s performance missed market expectations with 10 consecutive quarters of low-to-mid single-digit sales growth.
“The worst is behind them with a gradual recovery,” said Abneesh Roy, managing director at Nuvama Institutional Equities. “The stock price reaction may be neutral as the numbers were broadly in line even though volume growth was below market expectations of 3%. A better monsoon would bode well for them.”
India’s price-sensitive consumer industry is facing a demand crisis after companies raised sticker prices by nearly a quarter in the past two years to offset the impact of input costs. This was the first increase in the immediate aftermath of global supply chain disruptions caused by mobility and business curbs deployed to curb the spread of the coronavirus.
Then, record low policy rates in the world’s richest countries and the conflict in Ukraine sent commodity prices soaring. Over the past four quarters, companies have been cutting prices as consumers show a clear preference for cheaper products, but this strategy has not yet helped increase sales.
HUL’s gross margin rose 350 basis points (bps) in the fourth quarter, while earnings before interest, taxes, depreciation and amortization (ebitda) margin fell 30 basis points to 23.4%. 1 basis point is 1/100th of a percentage point.
The stock fell slightly to ₹2,259.15. Results were announced after market hours.
