Hindustan Unilever (HUL) on Thursday reported a robust growth in volumes of 16% year-on-year for the three months to March on the back of all round growth. The FMCG major had reported a contraction of 7% in volume in Q4FY20 following the nationwide lockdown.
The company’s profits jumped 41% year-on-year during the quarter to Rs 2,143 crore, ahead of Bloomberg consensus estimates of Rs 1,968 crore. Revenues rose a sharp 34% y-o-y to Rs 11,947 crore again beating estimates of Rs 11,733 crore.
Sanjiv Mehta, CMD, said it was too early to predict how the business would fare in the current quarter given the surge in infections.“While the first two weeks of April were good there is no doubt mobility has slowed.There has been an impact,” Mehta observed, adding discretionary categories will be linked to mobility.
Nonetheless the impact is expected to be limited given only localised restrictions and no general lockdown. Mehta believes the impact could be smaller than seen in the April-June quarter last year. Rural demand, the CMD said, has held up so far.
HUL’s March quarter performance came on the back of a double-digit growth registered in the health, hygiene and nutrition segment which forms 80% of the business and discretionary business which improved from the lows of last year. The out-of- home business which includes ice-creams, had also got impacted as consumers decreased their spends. However, it bounced back strongly in the March 2021 quarter.
HUL’s operating profit margins rose 180 basis points y-o-y to 25% driving up the EBITDA (earnings before interest, tax, depreciation and amortisation)by 45% y-o-y to Rs 2,987 crore.
Commodity inflation in tea, palm oil and crude-driven derivatives had prompted the company to cut costs with the intention of leaving th price value equation intact for the consumer and take calibrated price increases, Mehta said.
Srinivas Phatak, chief financial officer, HUL, said the demand outlook was hard to predict given “we are in midst of an unprecedented environment” with the Covid surge. He added the company has made significant enhancements to capacity which is now 1.3X compared with that of pre-Covid period.
“We had initiated multiple models to ensure stocks are available downstream and closer to the consumers,” he explained. Phatak said more than 5,00,000 outlets can order digitally implying that if a salesperson is unreachable, the retailer can order online. “The company has added 1,000 outlets a day to create this capacity,” he said.