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What does HUL Q1 result tell us about India’s consumption during the lockdown

Food and refreshment segment showed strong growth of 51.7 percent at Rs 2,958 crore. EBIT increased 53.6 percent YoY to Rs 582 crore in Q1 FY21

July 21, 2020 / 07:08 PM IST
 
 
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Hindustan Unilever, India's the largest FMCG company, on July 21 reported a standalone profit of Rs 1,881 crore for the quarter ended June, a growth of 7.2 percent compared to previous quarter, supported by sharp fall (down 31.4 percent) in advertising and promotion expenses, and strong double digit growth in foods and refreshment segment. However, it was impacted by exceptional expenses with respect to restructuring and acquisition.


In a media concall post the announcement of Q1 results, Chairman and Managing Director, Sanjiv Mehta said the products that saw highest demand during the lockdown were coffee, santisers, deep cleaning and Kissan products.


HUL offers prominent coffee brand, BRU, sauces and jams fall under the brand Kissan.


Within deep cleaning, the company offers products such as Domex under home care category and Lifebuoy under skin care category.


Skin Cleansing led by Lifebuoy delivered strong double digit growth across formats, said Srinivas Phatak, Chief Financial Officer,HUL.

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He also said the company has stepped up Lifebuoy Handwash capacities by five times and sanitisers by 100 times.


Within the food and refreshment category, riding on the in-home and wellness and immunity trends, tea and coffee delivered strong performance with double digit growth.


On the other hand, demand for ice creams, skin, colour cosmetics, deodorant were impacted due to supply led issues and closure of some of the channels that were extremely relevant for the categories, Mehta said.


“Ice creams, food solutions and our vending businesses which are driven by primarily out of home consumption were massively impacted by the lockdown and closure of restaurants/eateries,” he added.


Domestic nutrition business ‘performed well’ with immunity boosting Horlicks with added zinc launched in the quarter.


“The integration of GSK-CH's nutrition business with us was done seamlessly with good performance on both growth and margins," it added,” Mehta said.


Volume contraction was far less than analysts expectations of 11-13 percent for the quarter.


Revenue from its home care segment fell 2.1 percent year-on-year to Rs 3,392 crore and its EBIT declined 8.9 percent to Rs 637 crore, while beauty & personal care division registered a 12 percent decline in revenue at Rs 4,039 crore and its EBIT dropped 16.5 percent to Rs 1,134 crore in Q1FY21.


However, its foods & refreshment segment showed strong growth of 51.7 percent at Rs 2,958 crore and 53.6 percent increase in EBIT at Rs 582 crore for the quarter ended June 2020 YoY.


"Our performance in the quarter has been resilient and reflective of the intrinsic strength of our portfolio, agility in operations, excellence in execution, purpose-driven leadership and our strong balance sheet," Mehta said.


The company has divided its portfolio in three categories-Health, Nutrition and Hygiene which constitutes 80 percent of the portfolio delivered healthy mid-single digit domestic consumer growth.


"The negative impact of adverse mix and higher COVID-19 related costs were deftly managed by dialing up savings and unlocking synergies of GSK-CH merger enabling us to sustain healthy EBITDA margins of 25 percent," HUL said.


Standalone revenue from operations during the quarter stood at Rs 10,560 crore, increasing 4.4 percent compared to Rs 10,114 crore in corresponding period last year.


Overall numbers were ahead of estimates. Profit was expected at Rs 1,790 crore on revenue at Rs 9,875 crore for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.

 

Himadri Buch
first published: Jul 21, 2020 06:35 pm
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