Hindustan Unilever Q2 results: Net profit down 2.4%, volume growth at 3%

Growth moderates in urban areas, rural India sees gradual pickup

Hindustan Unilever (HUL), one of the country’s largest consumer companies, reported that its 2024-25 (FY25) July-September quarter (Q2) numbers missed analysts’ expectations. In its outlook, the management said it expected demand to remain stable.

 

This comes on the back of the company witnessing moderating growth in urban areas and a gradual recovery in rural areas in Q2FY25.

 

HUL’s net profit was Rs 2,591 crore in the quarter ended September, down 2.4 per cent, while its underlying volume growth stood at 3 per cent in the quarter. The maker of Lux soaps said in its earnings release that in the base quarter, there was a one-off indirect tax credit from a favourable resolution of past litigation, which benefited both the top line and bottom line in the beauty and well-being segment. Excluding this, the profit after tax before the growth of exceptional items is at 2 per cent.

 

 

According to Bloomberg estimates, analysts had estimated net profit at Rs 2,693 crore and revenue at Rs 15,753.1 crore.

 

The fast-moving consumer goods (FMCG) major’s revenue was higher by 1.9 per cent year-on-year (Y-o-Y) at Rs 15,926 crore.

 

 

“In the September quarter, FMCG demand witnessed moderating growth in urban markets, while rural   areas continued to recover gradually. In this context, we delivered a competitive and profitable performance,” Rohit Jawa, managing director and chief executive officer at HUL, was quoted as saying in the company’s earnings release.

 

He added: “We continued to execute on our strategic priorities of transforming our portfolio while generating healthy earnings before interest, tax, depreciation, and amortisation margin and cash flows, providing attractive returns to our shareholders.” Other FMCG firms that have released their results have also talked about a slowdown in urban markets. 

 

The company’s profit before interest, depreciation, and tax increased by 0.7 per cent in Q2, reaching Rs 4,006 crore.

 

Sequentially, HUL’s revenue was up 1.4 per cent, and its net profit was down 0.7 per cent. 

 

Jawa also said in his release, “We remain watchful of the gradual recovery in consumer demand while creating a sustained competitive advantage through our business fundamentals: investing behind our aspirational brands, scaling market-making innovations, and maintaining operational rigour.”

 

In the press conference after its earnings, Ritesh Tiwari, chief financial officer at HUL, said, “After a prolonged period of benign commodity prices in this quarter, crude oil, palm oil, and tea witnessed inflation of 10 per cent and 25 per cent Y-o-Y, respectively.”

 

He added that if commodity prices remain where they are, the company expects low single-digit price growth in the near term. Tiwari also said that it will take calibrated price increases in skin cleansing and tea. “In the October-December quarter, you should expect overall value growth ahead of volume growth,” he added.

 

While talking about the moderation in urban growth in the quarter, Jawa said in the press conference, “In big cities, there is a downward trend in growth, and I include all channels in all segments. Let’s not forget that urban has been driving the engine of the FMCG industry for the past several quarters. We are operating from a high base, and some normalisation is probably to be expected.”

 

He said that the company will stay focused on where the growth is. “There’s always growth in the market. It’s a big market. We operate in many segments. We want to focus on investing behind our capabilities and our brands, and on market development, to stay consistent with the investment, and our job is to be competitive and increase competitiveness in all market conditions, and we want to come out stronger,” Jawa added.

 

While talking about rural growth, Jawa said that rural growth has been coming back and has now surpassed urban for the last few quarters.

 

“Rural areas are growing steadily, though it is not a dramatic change. The trend is positive. Factors like favourable weather, a good monsoon, and positive outcomes from the kharif crop bode well for rural demand,” he said.