Smaller pack purchases by inflation-hit consumers drove sales for FMCG giant Hindustan Unilever, which reported a 19% rise in consolidated net profit for the third quarter ending December 31. The company reported consolidated net profit at Rs Rs 2,989 crore versus up from Rs 2,508 crore mainly due to the exceptional gain realised from the divestment of its Pureit business.
The continued deceleration of urban discretionary spending continued to impact the volume growth of the consumer goods company which reported a flattish underlying volume growth (UVG) in the December quarter.
"We have seen a higher negative mix effect than other quarters," said chief executive officer Rohit Java in a post earnings call with analysts, noting that consumers are preferring to buy smaller packets of premium products. Notably, HUL launched a Rs 10 pack of its detergent brand, Surf Excel Liquid.
While the premiumisation trend continues to shape consumption patterns, Java said, "There is clearly a preference for smaller packs across categories and that has become more evident this quarter (third). We do not see that changing in the very near term." However, the HUL executives don't see the trend continuing in the long term and expect it to fade away and expect improvement in commodity inflation to support consumption recovery.
"We don’t believe there is a material issue that is growing up. We have seen that happening during Covid, so we don’t believe there is more stress coming in from consumption trends, we are trying to incentivize consumer to buy more large packs," said chief financial officer Ritesh Tiwari.
"Things should look better from here," he added.
However, HUL anticipates the trend of demand moderation, particularly in urban markets, to persist over the long term.
The company has projected its EBITDA margin to remain at the lower end of the 23-24% range.
On a standalone basis, net profit stood at Rs 3,001 crore, up from Rs 2,519 crore reported in the same quarter last year. Consolidated net profit surged 19 per cent to Rs 2,989 crore. A Moneycontrol poll of nine brokerages showed that HUL was expected to report October-December quarter net profit at Rs 2,587 crore.
Meanwhile, consolidated revenue stood at Rs 15,559 crore in the quarter ending December 31, up from Rs 15,259 crore in the same period last year. HUL’s standalone revenue for the quarter rose by 2 percent to Rs 15,195 crore,supported by a 6 percent underlying sales growth (USG) in the Home Care segment, which benefited from high-single-digit volume growth in categories like fabric wash and household care. However, overall underlying volume growth (UVG) was flat, reflecting a negative product mix.
HUL reported an EBITDA margin of 23.5 percent, a 20-basis-point contraction compared to the year-ago period. Profit before tax (PBT) grew 16 percent to Rs 3,978 crore, aided by an exceptional gain of Rs 509 crore. Excluding the gain, profit after tax before exceptional items was flat year-on-year at Rs 2,540 crore.
Segment-wise performance
Home Care: This segment saw strong volume-led growth, with fabric wash and household care delivering high-single-digit growth. Liquid detergents continued their double-digit growth trajectory, while the launch of the Sun liquid dishwash brand marked a strategic push into the mass market.
Beauty & Wellbeing: Segment revenue grew 1 percent, though volumes saw a low-single-digit decline due to a delayed winter impacting the skin care portfolio. Hair care delivered mid-single-digit volume growth, driven by products like Dove and Tresemme.
Personal Care: Revenue in this segment declined by 4 percent, with a mid-single-digit volume drop due to a slowdown in the hygiene segment of skin cleansing. However, body wash products registered strong double-digit growth, and Lifebuoy was relaunched to address the hygiene segment's challenges.
Foods: Segment revenue remained flat, with mid-single-digit growth in packaged foods offset by a decline in volumes. Coffee registered double-digit growth, while tea maintained its market leadership.Strategic action: An acquisition, and a divestment
HUL announced the acquisition of Minimalist, a premium beauty brand, as part of its strategy to expand in the high-growth masstige beauty segment. The company also completed the divestment of its Pureit water purification business and approved a scheme for the demerger of its ice cream division. “Our strategic initiatives, including the Minimalist acquisition and ice cream demerger, position us well for long-term growth in the Indian FMCG sector,” said Rohit Jawa.
Going ahead, while the company watches the consumption trends and pace of recovery, it remains optimistic about the medium- to long-term opportunities in India's FMCG market, he said.
Demerger of ice-cream business
HUL announced that the company board has approved the demerger of its ice cream business, Kwality Wall's (India) Limited (KWIL), into an independently listed company.
The board approved the scheme of arrangement for the shareholders involving the demerger of its ice cream business. The company finalized the share ratio post demerger of the ice-cream for the investors in the ratio 1:1. Shareholders will receive 1 share of the new ice cream company for every share they own in Unilever. Upon demerger and listing of KWIL, the entire shareholding of KWIL will be held directly by shareholders of HUL, making the new ice cream company a 100% separate entity with its own shares listed on the stock market.
"The demerger will unlock fair value for HUL shareholders and give them the flexibility to stay invested in Ice Cream’s growth journey.” said Java.
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