High Inflation Eats Into Hul’s Sales Volume In March Quarter

Hindustan Unilever Ltd (HUL) on Wednesday reported flat quarterly gross sales quantity as India’s largest family items maker raised costs to offset surging enter prices, crimping demand for its merchandise.

The agency mentioned it noticed additional headwinds for the trade because the Russian invasion of Ukraine additional fuelled already-high crude costs and meals inflation. HUL’s chief govt officer (CEO) and managing director Sanjiv Mehta mentioned customers are “rationalizing” spending due to inflation.

Packaged shopper items corporations, together with HUL, have raised product costs to offset hovering prices of uncooked supplies resembling palm oil and gas. But the upper costs have compelled customers to chop down on consumption or purchase lower-priced items to handle family budgets, miserable demand. Retail inflation quickened to a 17-month excessive of 6.95% in March.

HUL’s efficiency is seen as a proxy for broader shopper sentiment in India. The maker of Knorr soups and Lux soaps mentioned revenue rose 8.5% from a 12 months in the past to 2,327 crore within the three months ended 31 March, beating analysts’ estimates. A Bloomberg survey of analysts estimated the corporate to report a standalone revenue of 2,203 crore.

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Revenue rose 11% from a 12 months earlier to 13,462 crore because it raised costs to counter excessive uncooked materials costs. The firm’s gross margin contracted by 3 proportion factors, whereas the working margin narrowed 20 foundation factors to 24.6% regardless of “very excessive” inflationary headwinds, the corporate mentioned.

Meanwhile, underlying quantity development in the course of the March quarter remained flat.

“Commodity inflation continues to be a major headwind for the trade. FMCG market development has slowed down, and volumes declined in high-single-digit within the March quarter. With excessive inflation in meals and kitchen gadgets, customers are titrating volumes, and necessities have been prioritized over discretionary class gadgets. The near-term working setting stays difficult; inflation is impacting volumes, and development can be predominantly price-led,” chief monetary officer Ritesh Tiwari mentioned.

Tiwari mentioned the corporate would proceed to drive financial savings tougher and take calibrated pricing actions whereas defending and rising its shopper franchise. “Our margins will decline within the brief time period as value versus price hole will increase,” he mentioned.

HUL’s high administration, citing information from researcher NielsenIQ, mentioned the packaged shopper items trade reported worth development of 1% for the March quarter however volumes fell 8%. While NielsenIQ is but to launch its March quarter numbers, information shared by the researcher for the December quarter already pointed to excessive inflation hurting family consumption, particularly in rural markets.

The development continued within the March quarter, partly fuelled by a milder Omicron wave that restricted mobility for a part of the quarter, aside from the Ukraine disaster that triggered volatility in international commodity costs.

“In the December quarter, we had seen the discretionary spends decide up; then we obtained into one other wave of Omicron, individuals once more went again to working from house; that once more had an affect on discretionary classes,” Sanjiv Mehta instructed reporters throughout a post-earnings name. However, because the wave receded, enterprise in March was higher than in January and February.

Mehta mentioned with costs of all the pieces from edible oils to gas on an upswing, customers are rationalizing spending. “When they rationalize spends, that’s once they titrate the amount. And as a result of the costs have gone up, the volumes titrate. And you find yourself with quantity development being low,” he mentioned.

He mentioned worth development in rural markets remained flat whereas quantity development was detrimental previously three months. During the quarter, the corporate took a value hike of 10%.

Analysts monitoring HUL pointed to “aggressive” value hikes by the corporate in classes resembling house care.

Mehta, nevertheless, remained agency that HUL’s focus is to develop the enterprise sooner than the market.

suneera.t@livemint.com

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