HUL Q2 profit down 2.33%; separates ice cream business

FMCG major Hindustan Unilever Ltd (HUL) on Wednesday reported a 2.33 per cent decline in consolidated net profit at Rs 2,595 crore for the second quarter ended in September 30, 2024 impacted by moderation in demand from the urban market.

Photograph: Danish Siddiqui/Reuters

The company had logged a net profit of Rs 2,657 crore in the July-September quarter a year ago, HUL said in a regulatory filing.

However, revenue from product sales was up 2.36 per cent at Rs 15,703 crore in the September quarter, from Rs 15,340 crore in the year-ago period, HUL which owns power brands such as Surf, Rin, Lux, Pond’s, Lifebuoy, Lakmé, Brooke Bond, Lipton and Horlicks said.

“In the September quarter, FMCG demand witnessed moderating growth in urban markets, while rural continued to recover gradually.

“In this context, we delivered a competitive and profitable performance,” HUL CEO and managing director Rohit Jawa said.

HUL reported an underlying sales growth of 2 per cent and underlying volume growth of 3 per cent.

Total expenses were at Rs 12,581 crore in the September quarter, up 3.03 per cent year-on-year.

HUL’s total income, which includes other income, was up 2.14 per cent to Rs 16,145 crore in the September quarter of FY25.

HUL is separating its ice cream business, which owns brands as Kwality Wall’s, Cornetto and Magnum, and has done an independent valuation to have a fair idea.

The board of HUL on Wednesday decided to demerge the ice cream business, based on the recommendation of an independent committee, which was formed by the FMCG major in September this year.

The committee has said the ice cream business, which contributes 3 per cent to HUL’s turnover, has a different operating model, including cold chain infrastructure, and a distinct channel landscape, which limits synergies with other businesses of the company.

Addressing an earnings call, HUL CFO Ritesh Tiwari said, “Two thirds of our business we do in urban areas, and one-third we do in rural areas … we are seeing growth in the urban market moderating.

“We are seeing rural growth recovery is gradual … it impacts all the categories that we have.”

When asked if there were structural issues for the slowdown in urban market and the slow pace of recovery in the rural market, Tiwari did not give a specific reply but said, “We know there are certain elements which will determine the pace of growth and pace of recovery going forward, be it monsoon, be it employment, be it, for that matter, food inflation.”

Specific to the rural market, he said, “When the cumulative inflation was higher than the amount of wage increase that we had seen or income we had seen in rural areas, there was basically a deficit in disposable income.”

As a result, the spending capacity was limited in rural areas, he said, however, adding as macros have improved some extent of recovery has happened there.

On the outlook, he said, “In the near term, we expect demand trends to be stable with no further acceleration in pace of growth.”

In this context, Tiwari said, “Our focus remains on driving competitive volume-led growth, while continuing investments behind our brands and strategy priorities … If commodity prices remain where they are, we expect a low single digit price growth in the near-term.”

In the September quarter, HUL’s revenue from the Home Care segment grew 8 per cent to Rs 5,731 crore.

“Growth was broad-based with both Fabric Wash and Household care growing volumes in high-single-digit.

“Liquids portfolio, with strong double-digit volume growth, continues to outperform,” said HUL.

HUL strengthened its liquids segment with the expansion of Rin liquid and forayed into the floor cleaner market with a superior product under the Vim brand.

Its Beauty & Wellbeing segment also reported a growth of 2.51 per cent to Rs 3,421 crore led by a “mid-single digit” underlying volume growth.

“Hair Care continued its growth momentum and grew in high-single digits led by outperformance in Sunsilk, Dove and Tresemme. Skincare and Colour cosmetics delivered a mid-single-digit growth.

“Premium Skin portfolio maintained its double-digit growth trajectory,” it said.

While its personal care business declined 5 per cent to Rs 2,411 crore in the September quarter, as against Rs 2,536 crore a year ago.

This was on account of “negative pricing and low-single-digit volume decline,” said HUL.

Its skin cleansing business, in which HUL operates with brands Lux, Dove, and POND’S declined primarily on account of pricing actions taken during the year.

“Premium portfolio grew ahead of the segment and within that bodywash continued to strengthen its market leadership with high double-digit growth.

“Oral Care (Pepsodent) delivered a competitive high-single-digit growth led by Closeup,” it said.

Similarly, HUL’s revenue from Foods & Refreshment was down 1.24 per cent to Rs 3,803 crore due to “low-single-digit volume decline”.

“Tea continued to cement its market leadership through value and volume share gains.

“Green and Functional tea maintained their strong volume growth, however, overall category volumes remained subdued.

“Coffee grew in double-digits,” it said.

Nutrition drinks as Horlicks continued to gain market share, while consumption remained subdued.

“Foods (such as Kissan and Knor brands) saw low-single digit volume growth.

“Strong volume growth in Food Solutions, Mayonnaise, Peanut Butter, and International sauces continued on the back of market development actions, range extensions and distribution expansion,” it said.

Its ice cream business, where it has brands as Kwality Wall’s, Cornetto and Magnum – maintained its volume vis-à-vis last year.

HUL revenue from ‘Other Segment’, which includes Exports, Consignment, etc was down 5.24 per cent to Rs 560 crore.

Over the outlook, Jawa said: “We remain watchful of gradual recovery in consumer demand, while creating a sustained competitive advantage through our business fundamentals, investing behind our aspirational brands, scaling market-making innovations and maintaining operational rigour.”

HUL’s board also approved an interim dividend of Rs 19 per share for the year ending March 31, 2025.

The Board has additionally declared a special dividend of Rs 10 per share resulting in a total dividend payout of Rs 6,814 crore.

Shares of HUL on Wednesday settled at Rs 2,658 apiece on BSE, down 0.90 per cent from its previous close.