HUL's strong Q2 results signal revival of demand

Hindustan Unilever Ltd, India's largest personal care product maker, on Tuesday reported a better-than-expected increase in its September quarter net profit and revenues, signalling a revival of demand following the world's biggest lockdown.

Consolidated net profit rose 8.6 per cent to Rs 1,974 crore in July-September while revenue from the sale of products was up 13.7 per cent at Rs 11,510 crore, the company said in a regulatory filing.

Food and refreshment business saw nearly 83 per cent jump while home care and beauty and personal care segments were almost near the pre-Covid levels.

HUL, the maker of popular brands such as Rin, Dove, Lux, Lifebuoy, said the worst is behind and is “cautiously optimistic” on demand recovery.

The Indian economy had seen an unprecedented 23.9 per cent contraction during April-June as the lockdown imposed to curb the spread of coronavirus pummelled demand and investment.

While addressing a post earning call, HUL CFO Srinivas Phatak said, "The worst is behind us and the business is clearly picking up momentum. And therefore, I think what we want to call out is cautious optimism.

HUL got a major boost in its Q2 topline with the inclusion of GlaxoSmithKline Consumer Healthcare's health drink brands such as Horlicks, which performed well as immunity-boosting products are much in demand during the pandemic.

"... during the quarter, on a reported basis, our growth is 16 per cent which is including Horlicks. If you remove Horlicks and just to talk about our base business on a like-for-like basis, excluding M&A, our growth is 3 per cent,” said Phatak.

It is actually a significant step up on a sequential basis in growth, he added.

HUL CMD Sanjiv Mehta said, "Our operations and service levels are now back to pre-COVID levels and we have accelerated the pace of digitising our operations under the ‘Re-imagine HUL' agenda.”

"There is very clearly an improvement that is happening between the June quarter and the September quarter,” he said.

The economic outlook has improved given the various initiatives taken by the government and the Reserve Bank of India.

"In our sector, rural markets have been resilient but the demand in urban India especially in metropolitan cities has been muted. We believe that the worst is behind us and we are cautiously optimistic on-demand recovery,” Mehta added.

HUL's total expenses were at Rs 9,054 crore in Q2/FY2020-21 as against Rs 7,885 crore, up 14.82 per cent.

For the first half of this fiscal, HUL's net profit was up 7.14 per cent to Rs 3,871 crore against Rs 3,613 crore in the corresponding April-September period of the last fiscal. Its revenue was up 9.69 per cent to Rs 22,080 crore in the first half compared to Rs 20,128 crore in April-September last fiscal.

During the second quarter of 2020-21, HUL's revenue from the home care segment was down 1.54 per cent to Rs 3,318 crore against Rs 3,370 crore of Q2/FY2019-20 as consumption of laundry has been adversely impacted due to confined living.

Moreover, in the fabric wash, HUL has reduced prices to pass on the benefit of lower commodity costs to consumers.

Revenue from Beauty & Personal Care was also marginally down at Rs 4,550 crore as against Rs 4,580 crore.

HUL's essential part of Skin Care saw a pickup in demand, ‘winter portfolio sell-in' was impacted due to muted trade sentiment and liquidity constraints.

“Skin Cleansing grew in double digits on the back of a very strong performance in ‘Lifebuoy' and good delivery in ‘Lux'. Hand sanitisers and handwash segments continue to gain penetration and have delivered robust growths. Oral care grew in double digits with accelerated momentum in ‘Close Up'. Hair Care also grew in double digits," said HUL.

Its food & refreshment was up 82.94 per cent to Rs 3,379 crore as against Rs 1,847 crore of the corresponding period, helped by double-digit growth in segments as foods, tea and coffee as the in-home consumption' was on the rise.

"Performance of our nutrition business was competitive and disrupted supply lines are now fully restored. In the quarter, we expanded ‘Boost' nationally with the narrative of ‘Play a bigger game' and launched a special film on ‘Horlicks' to celebrate the deeper meaning of growth that stems from courage and confidence," said HUL.

However, its out-of-home consumption continued to be impacted though there was a sequential improvement in segments such as ice creams, foods solutions and vending businesses.

Revenue from "other" segment, which includes exports, infant and feminine care was up 41.55 per cent to Rs 436 crore, compared to Rs 308 crore in the corresponding quarter a year ago.

Meanwhile, in a separate filing, HUL said its board in a meeting held on Tuesday declared an interim dividend of Rs 14.00 per equity share of the face value of Re 1 each for FY 2020-21.

Shares of HUL settled at Rs 2,172.10 on BSE, down 0.31 per cent from the previous close.