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Informist, Wednesday, Oct. 23, 2024

 

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--HUL CFO: Will continue to premiumise product portfolio 
--HUL: See low single-digit product price growth if commodity prices stable 
--HUL CFO: EPS growth likely to be led by top line growth in medium term 
--HUL CFO: Will aim for modest operating margin improvement in medium term 
--HUL CFO: Want to maintain operating margins at current levels in near term 
--HUL CFO: Disposable income in rural India recovering with cooling inflation 
--HUL CFO: India's economic growth prospects bode well for FMCG consumption 
--HUL CFO: Investing money in augmenting capabilities 
--HUL CFO: Investing money where growth opportunities present 
--HUL CFO: We are market makers for FMCG in the country 
--HUL CFO: Long-term prospects for India FMCG industry robust 
--HUL CFO: Rural FMCG growth recovering gradually 
--CONTEXT: HUL CFO Ritesh Tiwari's comments at a press conference 
--HUL CFO: Moderating urban growth impacting all categories of products 

 

MUMBAI – Hindustan Unilever Ltd. hopes to maintain operating margins at current levels in the near term, at a time when moderating demand for fast-moving consumer goods in urban India is hurting all product categories of the company, Chief Financial Officer Ritesh Tiwari said at a press conference today. During Jul-Sept, the company's earnings before interest, taxes, depreciation and amortisation margin contracted 80 basis points on year to 23.8%.

 

India's largest listed consumer staples company expects recovery in overall FMCG consumption to be gradual over the next few quarters. Two-thirds of the company's business comes from urban areas, while the remainder comes from rural regions, Tiwari said. The recovery of sales growth in urban areas will depend on several factors such as macroeconomic trends, inflation and employment trends, he said. 

 

Over the medium-term too, HUL is only aiming for a modest improvement in operating margins. The modest outlook for margin improvement comes in the backdrop of the FMCG industry in India, over the last few years, seeing stiff competition in all major categories such as home care and foods, not just because of local brands but also due to quick-commerce players.

 

Lower disposable income with Indians due to slowing growth, high inflation and job cuts have worsened consumer demand. According to the company, India's FMCG industry saw 3-4% volume growth and 4-5% price growth in the last four-five years. 

 

Now, there is also the concern of higher raw material prices, including crude palm oil, which are back on an uptrend after being benign for the last few years, Tiwari said.

 

In recent years, FMCG companies have been forced to take some hit of the raw material cost jump, as they have not been able to pass on the entire price rise to consumers in an environment of stiff competition and muted demand. 

 

The company expects a single-digit hike in product prices if commodity prices remain stable. The company has already started taking some calibrated price hikes in certain products. Prices of raw materials such as crude palm oil have already surged in double digits.

 

Over the medium-term, HUL expects the growth in earnings per share to be led by topline growth, driven by a revival in the rural economy and premiumisation of its portfolio. Rural growth is recovering gradually for HUL and the FMCG industry, Tiwari said. As disposable incomes in rural India revive with cooling inflation, sales volumes are expected go up, he said. However, Tiwari cautioned that the kharif output and inflation trends will determine the pace of recovery. 

 

In the long term, Tiwari sees a case for higher FMCG consumption given the strong prospects of the Indian economy. HUL will keep investing in areas it sees new growth opportunities in, and will augment capabilities while reshaping the portfolio. "We are market makers for FMCG in the country," Tiwari said. 

 

For Jul-Sept, HUL's net profit fell nearly 4% as its raw material costs rose on year after five quarters. The fast-moving consumer goods major reported a net profit of INR 26.12 billion as compared with INR 27.17 billion in the same period during the previous year. 

 

The company's revenue from operations rose a mere 1.5% on year to INR 155.08 billion in the September quarter. Revenue growth during the quarter was below estimates due to lower-than-anticipated volume growth. The company's underlying volume rose 3% on year, while most brokerages had expected the volume to rise 5%. 

 

The company reported the earnings after market hours. Its shares ended 1% lower Wednesday at INR 2,659.30 on the National Stock Exchange.  End

 

Reported by Apoorva Choubey 

Edited by Akul Nishant Akhoury

 

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