HUL Q2 results: Earnings beat street estimates; net profit up 3.86% on-year

HUL's volume growth in health food drinks and coffee segments remains weak due to continued high price inflation.

Hindustan Unilever Ltd (HUL) on October 19 reported a standalone net profit of Rs 2,717 crore for the September quarter, up 3.86 percent from the year-ago period.

India’s largest FMCG company's revenue rose 3.53 percent to Rs 15,027 crore from a year ago, the company said in an exchange filing.

Net profit exceeded estimates, while net revenue was slight lower than projected. A Moneycontrol poll of four brokerages had pegged HUL’s Q2 revenue at Rs 15,300 crore and net profit at Rs 2,540.9 crore.

In an exchange filing, HUL said, "The reported numbers include a one-off credit from favourable resolution of a past indirect tax litigation. This benefitted reported turnover and PAT growth by 1 percent and 4 percent respectively."

Analysts expected price cuts, royalty payments and ad spends to weigh on profits. Brokerages had flagged tepid rural demand as consumers grappled with inflationary pressures.

HUL stock closed 0.7 percent higher at Rs 2,550 apiece on the National Stock Exchange ahead of the earnings.

The company’s July-September earnings before interest, tax, depreciation and amortisation (EBITDA) were at Rs 3,694 crore, growing 9.4 percent from a year ago. The EBITDA margin improved by 130 basis points YoY to 24.5 percent.

One basis point is one-hundredth of a percentage point.

Also Read | Hindustan Unilever sinks 2% as Q2 revenue fails to impress

Ad spend clocked in at Rs 1,720 crore, with the ad spend to sales at 11.4 percent back above its levels of 7 percent a year ago, with gross margin savings being reinvested for sales growth. HUL's underlying sales growth for the quarter ended September came in at 4 percent.

The Lifebuoy maker said the home-care division grew with 3.3 percent revenue growth. Beauty and personal care increased 4.5 percent with broad-based performance across categories. Food and refreshments grew 2.6 percent led by foods, coffee and health food drinks (HFD).

"FMCG demand is likely to continue a gradual recovery with tailwinds from the upcoming festive season, sustained buoyancy of services and 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 monsoon on crop output and reservoir levels," said Rohit Jawa, CEO and Managing Director.

He further added, "In this context, our focus is to provide superior value to our consumers, drive competitive volume growth, and invest behind our brands. We remain confident of the mid to long term potential of Indian FMCG sector and HUL’s ability to deliver a consistent, competitive, profitable and responsible growth."

The FMCG major's board has also declared an interim dividend of Rs 18 per equity share of face value Re 1 for FY24. The record date for the dividend has been fixed as November 2, 2023.