HUL’s net profit up 11 per cent in April-June due to hike in prices

As commodity prices rose, fast-moving consumer goods companies raised prices during the quarter. HUL raised prices in categories such as skin cleansers, shampoos and home care products, even as the company saw a strong uptick for its ice cream and cloth-cleaning products.

The company reported a standalone profit for the June quarter 2,289 crore against An estimated Rs 2,207 crore in a Bloomberg survey of analysts. The maker of Surf Excel Detergent and Dove Soap posted 6% growth during the quarter, albeit on a lower basis. Its volume growth remained almost unchanged in the March quarter.

The number comes at a time when industry volumes declined 5% in the June quarter, the company said in its earnings presentation, citing market data.

HUL said the operating environment remains challenging, marked by unprecedented inflation, which has impacted consumption. After the earnings announcement, CEO and Managing Director Sanjiv Mehta said, “Markets, especially from the lens of volume (growth), they remain soft.” Adding to inflation is still a matter of great concern.

Revenue for the quarter rose 19.7% compared to a year ago. done 14,272 crore; The company continued to hike “calibrated” prices during the quarter to counter higher raw material prices. The company’s gross margin declined 309 basis points from a year earlier. Advertising and promotional spend increased 29.7% year-over-year during the quarter.

Top company executives said sharp inflation is likely to hurt both margins and consumer demand in the near future, adding that margins for the September quarter will remain “under pressure” and will continue to be “under pressure” from the December quarter despite the recent moderation in commodity prices. may be improved. Said it will continue to broadly promote savings and take pricing action.

“Looking ahead in the near term, growth will be price-based as inflation continues to impact consumption. Inflation in most of the commodities picked up in the June quarter and has remained at very high levels. This, coupled with the consumption of higher cost pipeline inventory, will continue to put pressure on our September quarter margins. If the recent softening in the commodity persists, it will positively impact our sequential margins from the December quarter,” Chief Financial Officer Ritesh Tiwari said in a media call.

Despite recent corrections in some commodities like palm oil, a weak rupee could pose a challenge. During the quarter, HUL increased prices by 12% as commodities like crude and palm oil rose.

The company remains focused on gaining consumer franchise or market share while protecting its business.

“We have grown competitively while protecting our business model while maintaining margins in a healthy range. While there are concerns about inflation in the near future, the recent moderation in commodities, forecast of a normal monsoon and the monetary and fiscal measures taken by the government augurs well for the industry.

During the quarter, the company’s home care segment saw a 30% growth, while beauty and personal care grew by 17.3%. Analysts say that there has been a strong increase in prices in both these segments. “The price hike in the fabric wash and home care portfolio has been made as input costs continue to rise at a very high level,” the company said. The beauty and personal care category recorded “broad-based” growth. The company’s food and refreshment portfolio grew 9%.

To be sure, consumer-oriented firms faced a challenging operating environment in the June quarter, owing to weak rural demand and high input cost inflation; Crude oil and food inflation remained stable. This further affected the purchasing power. HUL said urban markets outperformed rural areas.

Analysts said HUL’s earnings were higher than estimates on the revenue front and in line with estimates on the operating profit and earnings front.

“High commodity inflation for most parts of the quarter resulted in contraction in both gross margin as well as operating margin. However, we believe palm oil prices have recovered significantly from mid-June highs. This will ease the pressure, as the company has increased the price by 10-15% in the last year to overcome this inflation. Moreover, volume growth in H2FY22 will be aided by price cuts in case of resumption of gramage in smaller packs,” said analysts at ICICI Securities.

Meanwhile, Mehta said there is a need to bring down inflation at the global level to increase the quantity of daily commodities. “One way for volumes to increase is as the economy grows. Economic growth means more money in the hands of more people. Another is that commodity prices tend to fall so that they (consumers) have less stress on the wallet and they Can consume more products. This is where the volumes will start increasing,” he said.

Quoting IMF estimates, Mehta said that if the Indian economy grows at 7% as predicted, it should be a very good sign for the country. “And they (India) should be able to deal with this big crisis,” he said.

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