HUL Q3 Profit Edges Up Despite Food Business Decline

New Delhi, January 19: Hindustan Unilever Limited (HUL) announced its financial results for the third quarter (Q3) of the fiscal year 2023-24, reporting a modest increase in its consolidated net profit. Despite facing challenges, the company demonstrated resilience and witnessed growth in certain segments.

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Muted Profit Growth and Market Dynamics

HUL reported a 1.08% increase in its consolidated net profit, reaching Rs 2,508 crore for the quarter ended December 2023. This marginal growth was influenced by a decline in the food business, which experienced lower demand. The FMCG segment showed signs of recovery in rural markets, although it had been facing a decline in previous quarters.

Segmental Performance

While the food business faced challenges, other segments such as home care, beauty, and personal care exhibited volume growth during the quarter. Revenue from product sales marginally decreased to Rs 15,259 crore compared to Rs 15,314 crore in the corresponding quarter of the previous fiscal year.

Cost and Expense Management

HUL's total expenses in the December quarter were slightly higher at Rs 12,305 crore. The company's consolidated total income saw a marginal increase to Rs 15,781 crore compared to Rs 15,707 crore in the same period of the previous year.

Volume Recovery and Market Growth

HUL's CFO, Ritesh Tiwary, highlighted the volume recovery in the home care, beauty, and personal care segments, which account for approximately 75% of the company's business. These segments experienced mid-single-digit underlying volume growth. However, the food and refreshment business witnessed a decline in volumes due to higher commodity inflation.

Tiwary observed a gradual recovery in the overall market, with urban demand followed by rural demand showing improvement. The two-year CAGR (Compound Annual Growth Rate) of the FMCG market growth improved from 1% in the September quarter to 2% in the December quarter, primarily driven by a positive swing in rural demand.

Margin Performance and Strategic Investments

HUL's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin stood at 23.7% in the December quarter, indicating a 10 basis point increase compared to the previous year's third quarter. The company strategically increased its gross margin and advertising and promotions investments to maintain a competitive edge.

Segment-wise Revenue Analysis

The home care segment, comprising brands like Rin, Surf Excel, Vim, and Wheel, experienced a revenue decline of 1.26% to Rs 5,444 crore. However, on a two-year CAGR basis, the segment achieved strong double-digit growth of 14% with high single-digit unit volume growth (UVG). Fabric wash and household care volumes showed positive growth.

The beauty and personal care segment, including brands such as Lux, Ponds, Lakme, Clinic Plus, Dove, Pears, Sunsil, and Fair & Lovely, reported flat revenue at Rs 5,782 crore. Skin cleansing revenue declined due to price reductions to pass on commodity cost benefits to consumers. Hair care delivered volume-led double-digit growth, while oral care grew mid-single digit.

The foods and refreshment segment witnessed a marginal revenue growth of 0.89% to Rs 3,733 crore. Tea, green tea, and flavoured tea performed well, while coffee grew in double digits driven by pricing. Health food drinks and ice cream also showed growth.

Management Commentary and Outlook

HUL's CEO and MD, Rohit Jawa, expressed satisfaction with the company's resilient performance despite challenging market conditions. He anticipates a gradual recovery in market demand supported by increased government spending, improved crop sowing, and better crop realization. HUL remains focused on driving competitive volume growth and investing in brand development.

Stock Market Performance

On the Bombay Stock Exchange (BSE), shares of Hindustan Unilever Limited settled at Rs 2,564.75 on Friday, marking a 0.66% increase from the previous close.