HUL's volume growth remains flat in December quarter2 min read . Updated: 31 Jan 2020, 10:15 PM IST
- Near term demand remains challenging, says HUL CMD Sanjiv Mehta
- The FMCG major will hike soap prices by 5-6% in March quarter
Mumbai: Hindustan Unilever Ltd (HUL), India’s largest listed consumer packaged goods firm by sales, posted a flat volume growth of 5% in the third quarter ended 31 December, 2019 as demand continued to suffer particularly in the rural markets.
The company that sells Lux soaps, Kissan ketchup and Lipton tea saw its consolidated net profit jump by 13% to ₹1,631 crore. Its total income during the December quarter stood at ₹10,208 crore, up 3% as against the same period previous financial year.
The company also reported a healthy margin expansion with EBIDTA (earnings before interest, tax, depreciation and amortisation) improving by 335 basis points during the quarter as compared to the year-ago period. The company attributed the imrovement to "its savings agenda and leverage in other expenses."
Sanjiv Mehta, chairman and managing director, HUL said despite the "sharp slowdown in rural and discretionary spends", the company has been able to register a "steady" 5% volume growth during the reporting quarter. After hitting a seven-quarter low in its sales volume, HUL had posted a 5% growth in the September quarter.
"We need more money in the hands of the consumers and boost consumer confidence. As a country we should not beat down the confidence. Thats very imporatnt and its not a doomsday scenario. Secondly, the government is conscious and I hope they will take steps that will result in putting more more money in the hands of consumers," Mehta told reporters.
In the December quarter, HUL's largest segment personal and beauty, which accounts for 45% of the company's overall sales, fell 2.8% as skincare category growth was impacted due to delayed winter coupled with slowdown in the market. Sales of the company's beauty and personal care segment during the December quarter stood at ₹4,448 crore.
Srinivas Phatak, chief financial officer, HUL said the price cut in the soaps category in the September quarter has not helped uplift its sales volume.
"Soaps growth has been negative in the last quarter. Because commodity prices were low, we had actually reduced prices (September last year). Typically, when we reduce prices, we expect some volume uplift ...but we ddint see that given the slowing market. Because of these twin factors of skincare getting impacted by weather and lower market growth, we have seen a muted headline," Phatak said.
However, the company is now looking at hiking price of its soaps brand including Lux and Dove among others by another 5-6% starting March this year due to increase in its input costs.
"Cost increase has been massive. The price of vegetable oil moving into the next quarter compared to the same period last year could be up by 25-30%. So we are talking about a significant price increase," Mehta added.
Revenue of its home care vertical increased 9.78% to ₹3,456 crore during the December quarter while foods and refreshment segment stood at ₹1,865 crore up 7.93% from the year ago period.
"Market growth continues to be sluggish. Near team demand continues to look challenging, " Phatak added.
Market researcher Nielsen India on Tuesday maintained its annual growth outlook for the country fast-moving consumer goods (FMCG) sector to 9-10% for 2020. In 2019, the sector grew 9.7% by value, due to weak quarterly growth rates in rural India.
The sector has been suffering from low volume growth in the last few quarters hit by low rural income and stagnating wages besides an erratic monsoon. This has dragged volume growth for consumer goods companies such as Hindustan Unilever, Godrej Consumer Products and Marico, among others.