Hindustan Unilever Ltd (HUL), India’s largest listed consumer packaged goods firm by sales, saw a further slowdown in its volume growth in the June quarter, because of weak consumption, particularly in rural areas.
HUL saw its net profit, driven by higher revenue and a fall in raw material cost, jump by 15% to ₹1,755 crore.
However, volume growth hit a seven-quarter low at 5% in the June quarter.
In the previous quarter, HUL had registered volume growth of 7%.
The company’s revenue from operations rose 6.6% year-on-year to ₹10,114 crore, while the cost of material consumed fell 6.5% from a year ago to ₹3,161 crore.
Its domestic consumer growth improved by 7%. Though volumes continued to fall, margins improved by 150 basis points on the back of improved operating and advertising spends.
Its advertising and promotions rose by just 0.7% from the year-ago period.
“Volume is likely to remain subdued in the short-term. We expect demand to be soft in the coming months as well. While consumption in the rural areas is growing, it is not growing as fast as it should be," Sanjiv Mehta, chairman and managing director, HUL, said at a press conference.
HUL has delivered a “resilient performance driven by expansion franchise, improvement in portfolio mix and sustained growth in margins", despite the overall slowdown in the market, said Mehta.
Growth during the reporting period was primarily driven by its home-care portfolio, which grew 10% on a comparable basis.
The personal care and beauty portfolio and the food and refreshment segments, grew 5.6% on a comparable basis. However, its personal wash segment witnessed muted demand, while its home-care segment recorded double-digit growth.
“We believe the second half of the year would be better than the first half. The measures introduced by the government in the Union budget will take some time to translate into results," Mehta said.
The company also announced that it has received approval from its shareholders and creditors for the proposed merger with GSK Consumer Healthcare. Subject to approvals from the National Company Law Tribunal, the integration is likely to be completed by the end of 2019.
“We do not operate from quarter to quarter. We work on a long-term plan. We have robust a pipeline and we will continue to launch and relaunch our brands," Mehta said.
In the June quarter, Pond’s Men range of facial cleansers and moisturisers and FAL Ayurveda face-wash and facial kits were launched.
“Because of the liquidity issue, overall consumption has been under pressure. There has been a slowdown across all categories in the fast moving consumer goods industry. Given the slow pace of demand in the rural sector, maintaining a volume growth of even 5-6% would be tougher in the coming months," said an analyst who did not want to be identified.