- Hindustan Unilever’s Q1 sales and volume growth lower than street expectations.
- Home care segment’s revenues grew 10% during the quarter, beauty & personal care grew at 4% and foods at 5%.
- FMCG markets are recovering gradually although the operating environment remains challenging, says Rohit Jawa, CMD of HUL.
The homecare-to-foods major reported year-on-year sales volume growth at a modest 3% for the April-June quarter – well below the estimates of most brokerages that had predicted a reading of around 4-5%. In fact, IIFL expected HUL to post sales growth of 8%, but here too, the company’s actual numbers were slightly disappointing.
HUL's EBITDA margins also expanded by 40 basis points YoY to 23.6% – most analysts were expecting it to expand by at least 65 basis points on account of softening commodity prices. EBITDA is earnings before interest, tax, depreciation and amortisation.
“FMCG markets are recovering gradually although the operating environment remains challenging. In this context we have delivered a resilient and competitive performance whilst stepping up our EBITDA margin,” said Rohit Jawa, chief executive officer and managing director of HUL.
Price growth likely to be flattish-to-negative in the coming quarters
In its outlook, HUL also said that if commodity prices remain where they are, its price growth will be flattish-to-negative in the coming quarters. It also said that competitive intensity will go up further.
To beat it, it said that it’s focussed on the right price-value equation and building back gross margin.
“We continue to manage our business dynamically to drive savings harder and provide the right price-value equation to our consumers,” the company said in a release. It is also stepping up its advertising and promotion spends.
“In the near-term, FMCG industry will continue to witness rebalancing of price-volume growth equations and a gradual recovery in consumer demand. I am confident of the medium-to-long- term prospects of the Indian FMCG sector,” said Jawa.
Home Care segment outperforms; Tea & ice cream show modest growth
Home care segment’s revenues grew 10% during the quarter with underlying volume growth (UVG) in the mid-single digits. “Both fabric wash and household care grew double-digit led by focused market development actions and premiumisation,” HUL said in the release.
Beauty & Personal Care delivered 4% revenue growth with mid-single digit underlying volume growth. Further price reductions were taken in the soap portfolio in this quarter, HUL said.
“Skin Care and Colour Cosmetics grew in double digits on the back of strong performance in the premium portfolio. Hair Care delivered mid-single digit UVG led by Tresemme, Indulekha and Clinic Plus. Skin Cleansing had a modest volume-led growth with Lux and Hamam continuing to outperform,” the company added.
Foods & Refreshment revenue grew 5% with near flat UVG. Tea saw modest volume-led growth as the category continued to see consumers downgrading due to higher inflation in premium teas vis-à-vis loose tea.
Ice cream sales too grew modestly in mid-single digits due to the high base of last year, and unseasonal rains which played spoilsport during summer.
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