High inflation eats into HUL volumes
NEW DELHI/MUMBAI: Hindustan Unilever Ltd (HUL) Wednesday reported flat quarterly sales volume as India’s largest household goods maker raised prices to offset surging input costs, crimping demand for its products.
The firm said it saw further headwinds for the industry as the Russian invasion of Ukraine further fuelled already-high crude prices and food inflation. HUL’S CEO and managing director Sanjiv Mehta said consumers are “rationalizing” spending because of inflation.
Packaged consumer goods companies, including HUL, have raised product prices to offset soaring costs of raw materials such as palm oil and fuel. But the higher prices have forced consumers to cut down on consumption or buy lower-priced goods to manage household budgets, depressing demand. Retail inflation quickened to a 17-month high of 6.95% in March. HUL’S performance is seen as a proxy for broader consumer sentiment in India. The maker of Knorr soups and Lux soaps said profit rose 8.5% from a year ago to ₹2,327 crore in the 3 months ended March 31, beating analysts’ estimates. A survey of analysts estimated the company to report a standalone profit of ₹2,203 crore.
Revenue rose 11% from a year earlier to ₹13,462 crore as it raised prices to counter high raw material prices. The company’s gross margin contracted by 3 percentage points, while the operating margin narrowed 20 basis points to 24.6% despite “very high” inflationary headwinds, the company said.
Meanwhile, underlying volume growth during the March quarter remained flat.
“Commodity inflation continues to be a significant headwind for the industry. FMCG market growth has slowed down, and volumes declined in high-singledigit in the March quarter. With high inflation in food and kitchen items, consumers are titrating volumes, and essentials have been prioritized over discretionary category items. The near-term operating environment remains challenging; inflation is impacting volumes, and growth will be predominantly price-led,” chief financial officer Ritesh Tiwari said. He said the company would continue to drive savings harder and take calibrated pricing actions while protecting and growing its consumer franchise. “Our margins will decline in the short term as price versus cost gap increases.”
HUL’S top management, citing data from researcher Nielseniq, said the packaged consumer goods industry reported value growth of 1% for the March quarter but volumes fell 8%. While Nielseniq is yet to release its March quarter numbers, data shared by the researcher for the December quarter already pointed to high inflation hurting household consumption, especially in rural markets.
The trend continued in the March quarter, partly fuelled by a milder Omicron wave that restricted mobility for part of the quarter, apart from the Ukraine crisis that triggered volatility in global commodity prices.