Hindustan Unilever Q2 earnings meet estimates but margin shrinks

Hindustan Unilever Ltd said Tuesday net profit for the second quarter of this fiscal year rose 8.86% from a year earlier as it increased prices of some products to offset a rise in input costs and controlled expenses.

Standalone net profit increased to Rs 2,187 crore for the quarter ended September 2021 from Rs 2,009 crore in the same period last year, India’s biggest fast-moving consumer goods company said. Profit grew 6.11% from the first quarter.

Operating revenue for the second quarter rose 11% to Rs 12,516 crore from Rs 11,276 crore a year earlier. On a quarter-on-quarter basis, the rise was a muted 6.7%. Total expenses grew 11.6% to Rs 9,883 crore.

HUL’s results matched analysts’ estimates of a 10-15% rise in revenue and 8-10% increase in net profit.

The company said its focused actions on net revenue management and savings enabled it to manage inflationary pressures and deliver a healthy bottom-line performance.

The markets were perhaps expecting a sharper spike in the top-line and bottom-line numbers, as the country’s economy has opened up and is looking to go full throttle ahead. But their disappointment showed in the company’s counter falling 2.67% to close the day at Rs 2,583 per share on the BSE. 

HUL Q2 other key details:

1) Revenue from the home care segment grew 15%, helped by price hikes to offset rising input costs.

2) Sales from the beauty and personal care segment rose 10%, thanks to price hikes and as mobility improved.

3) Revenue from the food segment increased 7% with health drinks volumes growing in double-digits.

4) EBITDA margins shrank by 40 basis points to 25%. EBITDA came in at Rs 3,132 crore versus Rs 2,869 crore.

5) The company declared an interim dividend of Rs 15 per share. 

Management Commentary:

Sanjiv Mehta, chairman and managing Director at HUL, said trading conditions improved sequentially in the September quarter but remained challenging with “unprecedented” levels of input cost inflation and “subdued” consumer sentiment.

“In this backdrop, we have delivered a strong performance growing top line in double digits and stepping up profitability sequentially,” he said.

Mehta said large parts of HUL’s business continue to gain market share. Calibrated price increases and a “laser sharp” focus on savings helped the company protect its business model, he said.

“Looking forward, we remain cautiously optimistic about demand recovery. In these times of uncertainty and unprecedented input cost inflation, we continue to firmly focus in delivering consistent, competitive, profitable and responsible growth,” he added.