HUL sees rural demand growing faster vs urban; demand for small packs rises
This story was originally published at 21:08 IST on 22 January 2025
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--HUL: Margins in all segments remained healthy in Oct-Dec
--CONTEXT: Comments by HUL mgmt in post-earnings virtual press conference
--HUL on ice-cream ops: Great business with significant growth potential
--HUL: Near-term EBITDA outlook retained at lower end of range 23-24%
--HUL CEO: Expect rural demand to be better than urban
--HUL: Quick commerce revenue growing quite fast, 7-8% of sales
--HUL CFO: Co being very selective on acquisitions
--HUL: See inflation coming in tea, crude palm oil
MUMBAI – Hindustan Unilever Ltd. sees growth in rural demand being more robust than urban demand, Chief Executive Officer and Managing Director Rohit Jawa said Wednesday. The demand for small packs of products grew faster than for large packs in both rural and urban areas. This follows the launch of price-wise packs to support general trade and kirana stores.
However, the company expects this to be transitory behaviour. In urban areas, consumption is muted due to changes in shopping behaviour with the introduction of small packs. The company's quick commerce business contributed 7-8% of the total revenue.
The total volume growth in the fast-moving consumer goods segment has slowed over the past six months due to subdued demand, the company management said. Within this, it expects growth in urban demand to continue to be moderate, while the gradual recovery in rural demand will be sustained.
The FMCG major's margins in all segments remained healthy in the December quarter. The margin in the home care business was 18%, 29% in beauty and well-being, 18% in personal care, and 20% in the foods segment, company officials said.
Although HUL's volume growth, including the impact of turnover realisation of the mix of products sold, was flat, the underlying sales growth, which refers to the increase in turnover for the period, excluding any change in turnover resulting from acquisitions and disposals, was up by 2.0%. While absolute volume grew competitively, it was offset by a negative mix.
The company said it would continue to maintain healthy margins with a gross margin of 50.0% and earnings before interest, taxes, depreciation, and amortisation margin of 23.5%. Amid rising material prices, the company expects to keep its EBITDA margin at the lower end of the range 23-24%. The company's EBITDA declined over 2% on a quarterly basis to INR 35.70 billion.
Jawa said the company will raise prices over a period of time if faced with a sharp rise in input costs due to commodity inflation. The company, which is the market leader in tea retail, has already raised the prices of some of its products, including tea and personal care products, after tea and palm oil procurement costs continued to rise. According to the top official of India's largest consumer goods company, volatility in commodity prices is expected to continue.
Talking about the acquisition of the brand Minimalist, Chief Financial Officer Ritesh Tiwari said the company is "very selective" about such acquisitions. The annual revenue rate of the acquired brand is around INR 5 billion.
On the recent de-merger of its ice-cream business into Kwality Wall's India Ltd., Tiwari said there is signifciant growth potential for the business following the demerger. End
Reported by Simran Rede
Edited by Rajeev Pai
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