Hindustan Unilever , Hindustan Unilever Q1, HUL, HUL Q1, HUL Q1 earnings

HUL’s revenue for Q1 FY22 stood at Rs 11,730 crore, up 12.7 percent from Rs 10,406 crore in the year-ago period.

In a quarter marked with uncertainties with the onslaught of the COVID-19 pandemic, Hindustan Unilever (HUL) reported a 9.6 percent jump in its net profit at Rs 2,061 as compared to Rs 1,881 crore clocked in the corresponding period last year. The FMCG behemoth’s revenue for the quarter stood at Rs 11,730 crore, up 12.7 percent from Rs 10,406 crore in the year-ago period.

Its earnings before interest, tax, depreciation and amortisation (EBITDA) was up 7.7 percent at Rs 2,847 crore against Rs 2,644 crore and the margin was down at 23.9 percent versus 25 percent, year-on-year (YoY).

Addressing a media briefing after reporting its first-quarter results, HUL management said the focus on e-commerce continued growth in rural India, and growth in categories such as foods and refreshment, beauty and personal care, and home-care segment helped it tide over the challenging period.

“Rural has been the growth engine for FMCG for the last few quarters, and it continues to be resilient. Hopefully, we see a good monsoon and this will augur well for the rural economy,” said Ritesh Tiwari, Executive Director, Finance and Chief Financial Officer, HUL.

The discretionary out-of-home category continued to be a drag, the company informed.

Analysts, however, are not, too, enthused by the company’s performance.

“Overall performance was marginally below expectations. Management is cautiously optimistic in the near term. A possible surge in infection rates may cause uncertainty to demand; monsoon and crop sowing will remain key factors for rural demand. Commodity prices have remained volatile and elevated,” said Deepak Jasani, Head-Retail Research, HDFC Securities.

The digital recipe

Given the mobility restrictions during the quarter as several regions of the country underwent lockdown, HUL concentrated on increasing the reach of its eB2B app Shikhar.

“We have been able to drive a higher contribution of our app and Shikhar now contributes six times more as compared to the June quarter last year,” said Ritesh Tiwari, Executive Director, Finance and Chief Financial Officer, HUL.

According to Tiwari, the company has also doubled its contribution from e-commerce in the last year.

To fuel this growth further, HUL created packs designed exclusively for e-commerce and also rolled out a range of premium beauty products under its digital-only brand Simple. The company also plans to expand the presence of its direct-to-consumer platform UShop.

Discretionary drags

The company’s discretionary and out-of-home portfolio continued to suffer in the first quarter. Though categories such as ice cream witnessed a growth, it was on the low base of June quarter in FY21, which had witnessed country-wide lockdown.

Discretionary products under brands such as Lakme, Vaseline, Axe, Elle 18, Pond’s, and Glow & Lovely witnessed a 39 percent growth in comparison to Q1 FY21. However, when compared to pre-COVID period of (Q1 FY20), the segment registered a 24 percent de-growth.

Out-of-home showed similar trends. Brands such as Pureit, Kwality Wall’s, Cornetto, and Unilever Food Solutions reported a 91 percent growth against Q1 FY21 but a 40 percent drop as compared to Q1 FY20.

Its other products segments, which have several products in the essential category, saw growth. However, unlike last time there was no sales spike reported due to hoarding by consumers.

The home-care segment grew at 12 percent on double-digit growth in fabric wash. Beauty and personal care grew 13 percent led by haircare and skincare, both growing in high double-digits. Foods and refreshments delivered another quarter of strong performance and grew at 12 percent.

Pricing pressure

HUL’s margins continue to be under pressure on account of price rise in several key materials such as vegetable oil.

“Three of our biggest input materials remain volatile and at elevated levels. And we have continued to look for all leavers like savings, judicious and calibrated pricing to protect our business model,” Tiwari informed.

The company informed it has taken calibrated price increases across fabric wash and household care portfolio to partly offset the high inflation in input costs. This comes after two consecutive quarters of price increase in categories such as soaps and tea.

In Q4 FY21, HUL had increased the prices of its soap brands such as Lifebuoy and Lux by 6-7 percent.

The company is cautiously optimistic about the way ahead.

“With mobility improving, we believe the demand for FMCG products will go up, especially for discretionary categories. The strength of our portfolio and capabilities will hold us in good stead,” said Tiwari.


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