HUL rides out of the woods in Q1

Mint

6 days ago

Consumption engines are coming to life in India's urban and rural markets, powering sales at Hindustan Unilever Ltd (HUL) after several dismal quarters. India's largest packaged consumer goods maker scored growth across all its verticals, beating Street estimates on sales and profit as it looked ahead to sunny days.
Sales volumes at the maker of Lux soaps and Knorr soups grew 3% after three quarters of slowing growth, as the consumption-focused company gained from tax rebates for the middle class, lower interest rates, the start of rains, and its own entry into new segments. Net profit rose 8% to ₹ 2,732 crore on a 4% sales jump to ₹ 15,747 crore. Investors cheered the earnings, lifting HUL shares by 3.48% to ₹ 2,521.85 each at close.
Rohit Jawa, HUL's outgoing chief executive officer (CEO) and managing director (MD), listed several key factors that are expected to boost consumer spending. Among these are income tax rebates, and lower repo rates that trim housing loan EMIs and boost purchasing power. He also noted that decreasing food inflation is providing much-needed relief to consumers. Consequently, HUL anticipates that the first half of the current fiscal year will outperform the second half of the previous one.
"We feel that we are now cycling out some of the tough periods in the last few years,' Jawa told reporters at HUL's Mumbai headquarters.
Optimism at FMCG industry's bellwether bodes well for the country's consumption sector as a whole, as the economy navigates challenges on external trade and technological disruption.
Jawa's nearly four-decade stint at Unilever, which included roles like executive vice-president, North Asia and chairman, Unilever China, concluded on Thursday. He had served as HUL's MD and CEO for almost two years. Priya Nair, Unilever's president, beauty and wellbeing, takes over as new CEO on 1 August.
Jawa also expressed gratitude for his 37 years at HUL and Unilever.
'I have worked across eight markets. I have, in the last 12 years, been a CEO of three very significant markets in Asia. I feel very grateful and also excited, because I feel I need to do something different now, in the second half of my career…try new things. I'm looking to chart a new profile of work and a new way of living,' Jawa said.
Jawa also noted the resilience and improvement in both urban and rural informal sectors, a crucial segment for the company. While the salaried urban class faced recent stress, Jawa observed an uptick in urban consumption over the past few months, albeit a gradual one. Rural markets continue to sustain their improvement. He expressed optimism for mass consumption, attributing this it to a combination of fiscal and monetary policies, a favourable monsoon, and moderating food inflation.
"Hopefully, this will sustain,' said Jawa.
HUL's earnings before interest, tax, depreciation, and amortization (Ebitda) stood at ₹ 3,558 crore in the June quarter, with the Ebitda margin at 22.6%, a decline of 120 basis points over the year. Lower tax expenses due to a re-estimation of tax provisions aided profit after tax growth by 13%, the company said in its quarterly filings.
The company's 3% volume growth for the June quarter also exceeded street estimates, coming after flat to 2% growth in previous quarters. Analysts had projected HUL's standalone profit at ₹ 2,580 crore, with a revenue of ₹ 15,960 crore.
Jawa said there are visible signs of demand improvement across both urban and rural markets. The urban middle class, affected by high inflation, has been under stress, impacting demand for major consumer goods.
HUL reported sales growth across all verticals during the quarter.
Beauty and wellbeing saw 7% sales revenue growth, with low-single digit volume growth. Its personal care vertical (Lux, Closeup, Dove, Liril) grew 6%, driven by calibrated pricing actions due to commodity inflation. Foods delivered 5% sales growth. The company lowered tea prices in response to competition and lower input costs.
The home care division (detergents and floor cleaners) reported 4% sales growth, with the company reducing prices in parts of this portfolio in the previous quarter to pass on commodity benefits and address competitive intensity.
'We expect commodities to be range-bound, and hence, we expect that going forward, our pricing will be at low single digits,' said Ritesh Tiwari, chief financial officer, HUL.
Recent Kantar estimates indicate an overall FMCG volume growth slowdown to 3.9% for the 12 months ending June 2025. Household care, especially laundry and washing liquid, continues strong growth industrywide. Summer-centric categories were significantly impacted by unseasonal rains.
In 2024, HUL unveiled its Aspire strategy, focusing on 'core', 'future core", and 'market makers' portfolios to accelerate growth and attract customers.
'Our growth is driven by our strategy to move to fast-growth spaces and to go where the growth is—new channels, new segments, and also grow competitively led by volumes. We have grown our market shares this quarter. Our real focus is now is to keep moving our portfolio to the faster growth spaces. As that segment of our business gets bigger automatically, our natural growth rate will go up,' said Jawa.
Jawa said that 50% of HUL's total media spending is now on digital, with half of that on social media. 'We're just going where the consumers are going,' he said.
The company will continue expanding existing brands into new adjacent spaces. Over the past year, HUL has revamped core brands like Lifebuoy and Vim, and launched premium brands such as Liquid I.V. and Hellmann's mayonnaise. It also acquired new-age personal care brand Minimalist for ₹ 2,955 crore this year, sold its Pureit water purifier business, and announced the demerger of its ice cream business.
'We have launched several global brands like Liquid I.V., Nexxus and Hellman's. We are building locally as well. If need be, we will acquire brands like Minimalist locally,' he said. 'Our core brands—which is half of our business—we have renovated most of the brands there, made them more contemporary. Our future core brands are extending to new adjacent spaces, new benefits and formats, and on market makers, which is already a ₹ 7,000 crore portfolio is all about innovation.'
HUL will continue investing in its business as consumer demand improves.
'Taking the benefit of improved condition for FMCG consumption—the work that we had done with our portfolio, which is more premium, more future-focused—there is already a tailwind that is coming in the business. We had called out that we will further invest in the business…As we see gross margins going up, we will further invest the improved gross margin in the business,' said Tiwari.
During the June quarter, ad spends for the maker of Surf Excel detergent increased by 7.6% year-on-year.