HUL Q2 profit up 9% at Rs 2,187 cr

Mumbai: Hindustan Unilever, the country's biggest consumer goods company, reported an 11% growth in sales and a 9% rise in profit in the September quarter from the year earlier but warned of margin pressure due to surging commodity costs.

HUL's stock, which was up 3% before the announcement, fell nearly 8% in afternoon trade after earnings were announced. It, however, recouped some of those losses, ending 4.06% lower at ₹2,546.45 on the BSE Tuesday, making it the second-biggest loser on the benchmark index after ITC. The company said overall market sentiment remained subdued due to heightened inflation, uncertainty in the job market and the fear of Covid, although this has abated.

"If the economic activities in the country remain robust, then rural areas will see a growth rate higher than urban for a pretty long period of time," said HUL chairman Sanjiv Mehta.

Operating Margins Shrink Despite Price Hike
"But what we have seen now is that urban is picking up from a low base whereas rural has moderated from a high base," Mehta said. "We have to wait for a couple of quarters to see--is this a break in the trend, or is this of transient nature?"

HUL's performance is considered a proxy for broader consumer sentiment in India. Sales rose to ₹12,516 crore and net profit grew to ₹2,187 crore. Volume--the number of products that customers put in their shopping carts - grew 4%. The company declared an interim dividend of ₹15 per share, which will translate into a payout of ₹3,524 crore.

The local unit of the Anglo-Dutch Unilever said a faster vaccination rollout, urban sales picking up from a low base and increasing mobility should help the company navigate uncertainty in demand. Despite the company increasing average prices by 7% during the quarter, operating margins contracted 40 basis points to 24.6%. A basis point is 0.01 percentage point. Gross margins fell 140 bps.

"Inflation in certain commodities like palm oil, crude-based derivatives, ocean freight etc, or even tea, has been unprecedented. We haven't seen this kind of inflation for many years," Mehta said.

The company said health, hygiene and nutrition accounted for 85% of its portfolio and expanded 7% while discretionary items, not considered essentials, contributed 12% and grew 31%. The remaining business - out of home - saw a strong rebound with a surge of 74% from a weak base last year.

Sales rose about 15% in the homecare segment, which includes brands such as Rin and Domex. HUL's largest business, the beauty and personal care (BPC) segment, saw 10% growth driven by premium skincare products and soaps.

It had experienced uneven demand amid widespread stay-at-home measures last year. The food and refreshment business expanded 7%, including the acquired GSK portfolio, which added brands such as Horlicks and Boost to its existing range of tea, coffee and ice-cream.