Hindustan Unilever Ltd (HUL), India’s largest listed consumer packaged goods firm by sales, reported a slowdown in volume growth, in line with analysts’ estimates. The FMCG major reported 13% growth in net profit while volume growth dropped to 7%, which was expected between 5-7%, compared to double-digit growth the company has been seeing for many quarters.
HUL’s earnings—usually the bellwether for India’s fast-moving consumer goods (FMCG) market—help gauge consumer demand and monitor sentiment.
The Surf Excel maker’s net profit reached ₹1,538 crore for Q4 of FY19 compared to ₹1,351 crore in the fourth quarter last year. While volume growth fell, the EBITA (earnings before interest, taxes, and amortization) margin was up by 90 basis points.
“We have delivered a strong performance for the quarter despite some moderation in rural market growth," said Sanjiv Mehta, chairman and managing director of the company.
But the slowdown in rural consumption has affected many FMCG companies in the quarter ended March 31.
The FMCG industry was projected to grow at least two percentage points slower than in the last quarter of 2018 by consumer insights firm Nielsen. The projected growth of 11-12% for 2019 is a downward revision from its previous forecast of 13-14%, according to a report released by Nielsen.
The effect has been observed across all FMCG companies that have released their fourth quarter results in the last few weeks. Biscuit maker Britannia Industries Ltd., also saw a soft fourth quarter where its volume grew 7%, year on year. Vatika Shampoo-maker Dabur India Ltd also came felt the slowdown and saw its net profit fall by 6.5% from a year earlier to ₹371.5 crore.
“We do not think that there is a need to panic as it does not seem like a tailspin situation," said Mehta. “The next quarter -- due to the new government and a good monsoon -- could turn the situation," he added.
The recent cyclone Fani in Orissa might also affect sales in the next quarter, admitted Mehta.
Along with the results, the company also announced the appointment of Anuradha Razdan as executive director of human resources. Razdan previously used to handle the global home care category and global talent attraction for the company. Vibhav Sanzgiri has been appointed executive director, research and development. Both Razdan and Sanzgiri will assume their new positions by 1 June.