Hindustan Unilever Ltd.’s second-quarter profit was in line with estimates, driven mainly by price hikes on key brands in a bid to partly offset rising input costs.
The company has taken price hikes of 7% across portfolios during the quarter. According to Abneesh Roy, executive director (research) at Edelweiss Securities, that's "extreme and higher in many many quarters".
Still, HUL saw double-digit growth across segments such as home care as well as beauty and personal care.
“September quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments,” said Sanjiv Mehta, chairman and managing director at HUL, adding the company remains "cautiously optimistic" about demand recovery. “Calibrated price increases and laser sharp focus on savings helped us protect our business model while ensuring the right price-value equation for our consumer.”
According to Mehta, inflation in certain commodities like palm oil, crude-based derivatives and ocean freight has been unprecedented. "We haven’t seen this kind of inflation for many years".
While rural demand has seen some moderation in growth during the quarter, the maker of Dove soaps and Surf Excel detergent said rising mobility and improved spending in urban areas led to an upsurge in consumption of discretionary and out-of-home products. The food segment, however, had a soft quarter on the back of high-teens growth in the base period, HUL said, adding more than three-fourths of the business have gained market share and penetration during July-September.
Ritesh Tiwari, chief financial officer at HUL, told reporters in a post-earnings briefing that the company will step up launches in the discretionary category, which contributes 15% to its overall portfolio. “This category continues to improve and is now almost close to pre-Covid levels. In Q2, it grew 3% more than the September quarter of 2019.”
Segment-wise, skin care and cosmetics, premium hair oils and ice creams, which have faced strong headwinds for the past few quarters due to confined living, recovered strongly. Nutrition is yielding good results and health food drinks volumes grew double-digits, fabric wash outperformed while hand hygiene portfolio fell against a strong prior-year comparator.
The board declared an interim dividend of Rs 15 per share for the year ending March 31, 2022.
Shares of Hindustan Unilever fell 4.06% on Tuesday after the earnings were announced compared to a nearly 0.08% decline in the S&P BSE Sensex.
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