- Hindustan Unilever on Thursday reported a 10% increase in net profit to ?2,552 crore in Jan-Mar quarter as compared to ?2,327 crore during the same period last year.
- Sales during the quarter grew 11% to ?14,638 crore as against ?13,190 crore last year.
- However, EBITDA margin during the quarter fell marginally to 23.7% in Q4 FY23 from 24.6% last year.
- Adding to the woes, volumes in the rural market declined 3% in the March quarter from last year while overall FMCG volumes were flat on a yearly basis.
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An ET NOW poll of analysts had estimated net profit of ?2,614 crore for the fourth quarter.
“Starting with the operating environment, this year the FMCG industry witnessed unprecedented inflation across the wide basket of commodities. Lately we have seen commodities correct from their peak, inflation moderated on a year on year basis with easing in some of the commodities and lapping of high base,” said Ritesh Tiwari, chief financial officer at HUL said in a post-earnings concall.
“As we had anticipated and called out earlier, the slowdown in the FMCG market has bottomed out. This improvement was led by volumes which have turned flat in this quarter versus mid single digit decline in the December quarter,” he added.
The urban market continues to lead the growth, while the rural market has shown some signs of improvement with higher value growth, sequentially. While volumes continue to decline, the extent of decline has reduced versus last quarter, he said.
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HUL’s sales during the quarter grew 11% to ?14,638 crore as against ?13,190 crore last year. However, its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin during the quarter fell marginally to 23.7% in Q4 FY23 from 24.6% last year.
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‘In challenging circumstances of geopolitical uncertainties, high commodity inflation and tepid market growths, I am pleased that we have delivered yet another year of strong and resilient performance. We have added c. ?8,000 crore to our topline in this fiscal with volume growth in mid-single digits despite decline in FMCG market volumes,” said Sanjiv Mehta, chief executive officer and managing director at HUL.
Near-term operating environment likely to remain volatile with gradual recovery in volumes
Adding to the woes, volumes in the rural market declined 3% in the March quarter over last year while overall FMCG volumes were flat on a yearly basis. HUL says that consumption habits are changing amid elevated inflation and may recover gradually as consumer habits readjust.
Further Mehta expects the near-term volatile environment to remain as is with inflation still an issue.
“Looking forward, the near-term operating environment is likely to remain volatile. With inflation easing…and sequential softening in a few commodities, price and volume growths will rebalance. Market volumes will recover gradually as consumption habits readjust,” said Mehta.
The impact of inflation on consumer spending and playout of phenomena like El Nino needs to be watched out in the near term, said Tiwari.
“We expect volumes to recover gradually due to high levels of cumulative inflation and the fact that consumption habits typically revert with a lag. We need to be mindful that FMCG market volumes have been declining for almost a year-and-a-half. Rural markets volumes are still declining,” said Tiwari.
Mehta added that HUL stays confident of the medium-to-long-term potential of the Indian FMCG sector and HUL’s ability to deliver a consistent, competitive, profitable and responsible growth.
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The FMCG player’s board of directors have proposed a final dividend of ?22 per share, subject to approval of shareholders at the company’s annual general meeting (AGM). The total dividend for the year amounts to ?39 per share, which is an increase of 15% from FY22.
Earlier this week, rival Nestlé India reported a better-than-expected 25% rise in net profit to ?737 crore for the March quarter compared with ?591 crore in the same period a year ago.
Post the March-quarter results, which missed estimates and saw a fall in rural sales, shares of HUL were trading 1.7% lower at ?2,468.
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