HUL Q4 sales rise 10% on price hikes

Mumbai: Hindustan Unilever Ltd (HUL) posted a 10% growth in March quarter sales from the year earlier driven by price hikes as volume remained flat, attributing this to a squeeze in household expenses due to rising prices across categories. The country's biggest consumer goods company posted a 9% growth in net profit and warned margins will narrow in the short term as the price-versus-cost gap increases.

"Consumers don't buy in isolation. At the end of the day, they assign certain money for the household budget and expenses are not going up just in FMCG," said HUL managing director Sanjiv Mehta. "If you look at edible oil, or even grains, the costs are going up. So then they have to rationalise money. And when they rationalise the spends, that's when they titrate the volume." A good monsoon and harvest, better realisation for farmers and upfront spending by the government should augur well for the rural economy, he said.

Citing Nielsen data, HUL said it outpaced the overall fast-moving consumer goods (FMCG) market, which expanded 1% in value, while volume fell 8%. HUL's performance is considered a proxy for broader consumer sentiment in India.

Commodity Prices Key
Volume, or the number of products that the company sells, was flat, indicating that HUL's revenue expansion was not led by increased demand.

Sales rose to ₹13,190 crore from ₹11,947 crore a year ago, and net profit grew 9% to ₹2,324 crore in the fourth quarter from ₹2,143 crore. In the year ended March, HUL's sales expanded 11% to ₹50,336 crore.

Prices of crude and palm oil, key ingredients for soaps, shampoos and detergents, have risen 60% during the quarter from a year ago and net material inflation has grown over four times in the past two years.

The company expects some moderation of inflation in the second half of the calendar year, especially if geopolitical tensions ease. HUL warned that its goods could get pricier but only after other cost-saving initiatives were considered.

"Pricing will depend on how the commodity price increases, but I assume that the commodity prices in the quarters to come will go up even more. With that, we will have to take some price increases," said Mehta.

Nearly a third of HUL's overall business comes from items at affordable points such as Rs1, 5 and 10, where pricing largely remained unchanged but grammage was reduced. As a result, with the same number of units sold, volume remained unchanged, it said.