HUL Q3 net profit rises 12% YoY to ₹2,505 crore – rural slowdown ‘bottoming out’, says company

• India’s largest FMCG player reported a 5% growth in volumes in the December quarter, and said the rural slowdown is “bottoming out”.
  
• The company said that while the growth during Q3 was price-led, it noted that the “worst of inflation is behind us”.
  
• HUL announced an increase in its royalty payments to the Unilever group from the existing 2.65% of turnover to 3.45% by January 2025.
  
• The FMCG giant also announced its foray into the health and wellbeing segment with strategic partnerships with OZiva and Wellbeing Nutrition.
  

India’s largest FMCG player Hindustan Unilever on Thursday met analyst expectations with a 12% year-on-year rise in Q3 standalone net profit to ₹2,505 crore on the back of robust growth in its home care segment, and said the rural demand slowdown is ‘bottoming out’.

However, despite a moderation in inflation, HUL’s operating margins declined 180 basis points on a YoY basis to 23.6%. While Sanjiv Mehta, CEO and MD, Hindustan Unilever, noted that inflation has likely peaked, the margin stress is still present.

“Looking forward, we are cautiously optimistic in the near term and believe that the worst of inflation is behind us. This should aid in a gradual recovery of consumer demand,” Mehta added.

For the December quarter, the company reported a 5% volume growth, which was within the 4-5% range that analysts had forecast. HUL’s Q3 revenue grew 16.2% on year to ₹14,986 crore, again meeting analyst expectations.

“We remain cautiously optimistic in the near term. We have seen a softening [in prices] of a few key commodities, notably palm oil. We believe that the worst of inflation is likely behind us and this augurs well for the FMCG industry,” the company said, noting that the growth during the quarter was price-led.

Rural demand showing signs of improvement

Mehta also underlined that the company has observed an improvement in rural demand in the December quarter compared to the September quarter, partly driven by the festival season.

“With lower inflation, strong winter crop sowing and signs of a pickup in farm incomes, it is likely that the rural slowdown is bottoming out,” he added.

The company also noted that rural demand has been better than that of urban areas in the December quarter, which should be an encouraging sign as rural revival has been long awaited.

Climate change impact

Leading the company’s topline and bottomline growth were the home care, and beauty & personal care segments – while home care delivered a 32% YoY growth in revenue, the beauty & personal care segment reported a 10.5% growth during this period. Both the segments reported a double-digit volume growth as well.

However, the company said climate change had had an impact on HUL’s sales of hand and body care products. “This December happened to be India’s warmest in over a century. This has adversely impacted the performance of hand, body care, moisturizers and similar categories,” Mehta said during a post-earnings analyst call.

The softening inflation allowed HUL to reduce prices of products in the soaps and tea portfolio, the company added.

Foray into health and wellbeing

The company also announced its foray into the health and wellbeing category with strategic partnerships with OZiva and Wellbeing Nutrition.

“I am excited about our foray into the fast-evolving ‘health and wellbeing’ category through our strategic partnerships with OZiva and Wellbeing Nutrition,” Mehta said.

HUL’s Q3 numbers:


Source: Company reports

Royalty to Unilever group to increase from 2.65% to 3.45%

HUL also announced that its royalty payments to the Unilever group will increase by 80 basis points in a staggered manner till FY25.

HUL pays royalty to the Unilever group for use of technology, trademark licenses, and other services. The royalty is currently fixed at 2.65% of the turnover and will be subsequently increased to 3.45% by January 2025, the company said.

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