HUL shifts to cruise control on consumption journey | Company Business News

Stars have aligned favourably for India’s consumption economy, Hindustan Unilever Ltd indicated on Thursday, expressing confidence that its next six months will be considerably better than the last.

Lower food inflation, falling interest rates and a positive monsoon promise greater demand in the days ahead, India’s largest packaged consumer goods maker said, after reporting earnings that met Street estimates.

“We feel this is a good moment for the consumer packaged goods industry. Macros are turning favourable,” chief executive officer and managing director Rohit Jawa said at a post-earnings meeting. “Rural markets have recovered, and have been resilient and robust over the last few quarters. Monsoons have been good, projections have been decent, reservoirs are full, and agri output is strong.”

While India’s weather office has predicted above-normal monsoon for the year, the Reserve Bank of India has begun its rate cut cycle, reducing the repo rate by half a percentage point since February. Meanwhile, retail inflation fell to 3.34% in March, the lowest since August 2019. Food inflation stood at 2.69%, against 8.52% a year ago. Jawa said these factors will be an important trigger, especially for companies such as HUL with a large rural portfolio.

Also read | Hindustan Unilever keeps the faith in the countryside

Fuel for consumption 

“Urban demand has been subdued in recent quarters, but macro tailwinds are building. Food inflation is coming down to low levels, interest rates are down, EMIs are falling, tax relief is there, and crude that impacts every household in a meaningful way is soft—these factors bode well for consumption,” he said.

HUL is often seen as a proxy for domestic consumption, given its market position and its wide portfolio of household essentials; hence, its rosy outlook comes as a spot of relief for the economy buffeted by external headwinds. The International Monetary Fund, World Bank and the Reserve Bank of India have lowered their predictions for India’s growth in the current fiscal year.

The maker of Lux soaps and Knorr soups clocked a net profit of ₹2,493 crore in the March quarter, up 3.61% from a year earlier; however, it was lower than in the December quarter when it made a one-time gain of ₹509 crore by selling its Pureit water purifier business.

Standalone sales rose 2% in the March quarter to ₹15,000 crore. Sales volumes ticked up 2%, in line with Street estimates, against flattish volume growth in the December quarter.

Read this | HUL Q4 preview: Another tepid quarter as volume growth stays elusive

Volume surprise

A poll of 22 analysts had projected HUL’s standalone revenue at ₹15,200 crore, and profit of ₹2,482 crore. Volume growth came as a positive, analysts said.

“HUL posted an overall in-line Q4FY25 (versus our estimates). Volumes grew 2% year on year ahead of our flat estimates,” said Abneesh Roy of Nuvama Institutional Equities.

Ebitda margin at 23.1% declined 30 bps from the previous year. Ebitda refers to earnings before interest, tax, depreciation and amortization. The company increased prices for its tea, skin cleansing, and oral care products, while decreasing prices for select home care items.

Jawa noted that demand in urban markets remained stressed as inflation outpaced wage growth, leading consumers to prioritize essentials over discretionary items.

Chief financial officer Ritesh Tiwari said rural markets continued to gradually improve while urban markets have been moderating, with rural growth ahead of urban growth. “We believe both markets will improve over the next three to six months due to macro tailwinds.There are no new headwinds from a consumption perspective,” he said.

Few tariff worries

Addressing queries around the volatility in global markets and a global tariff war, Jawa said HUL remains largely protected from these international fluctuations.

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“We are generally very insulated as a company, with the tariff discussions…it’s an evolving situation. If the overall economy gets impacted, then we’ll also be a part of the same platform. We are local for local business, our supply chains are reasonably resilient; crude (prices) coming down, helps many of our categories and our costs. So, at this point, we don’t see a major issue that we need to race for, apart from what may happen to the world or the country at large,” he said.

Advertising and promotional spends were down 8.3% year-on-year during the quarter, while total expenses grew 2.73%.

During the quarter, HUL relaunched its top-selling soap brand Lifebuoy, citing declining sales in the ‘hygiene soap’ segment. Glow & Lovely too underwent a change in positioning.

“Our portfolio is stronger and future-ready, and we’re investing in future channels. We are stepping up investments now to support that growth,” Tiwari added.

Home care

HUL’s home care portfolio saw sales growth of 1.8% to touch ₹5,818 crore in the March quarter. “The segment witnessed negative price growth on account of pricing actions taken to pass on commodity-led benefits to consumers… Household care grew volumes in high-single digits,” the company said.

Also read | HUL needs a magic wand for recovery after subdued Q3

The beauty and wellbeing segment reported a 4.21% jump in quarterly revenues to ₹3,113 crore. Skin care and colour cosmetics declined in low-single digits impacted by mass skin performance. HUL sells brands such as Pond’s and Lakme in skin care and colour cosmetics.

The foods business experienced a slight dip in quarterly revenue at ₹3,896 crore, as low-single-digit price increases were offset by a decrease in volume.

On Thursday, the company unveiled a plan to help lift sales for its brands Boost and Horlciks—both acquired from GSK. Jawa said category consumption of nutritional drinks has been “under pressure”, prompting the company to draw up a three-pronged plan to revive sales.

“First, we’re revitalising the Horlicks brand—modernizing it to meet changing habits and positioning it as a credible, balanced source of health and taste, especially for mothers and children. Second, we’re adjusting our price-pack architecture to encourage larger pack usage, which drives consumption. Third, we’re doubling down on the adult nutrition segment with Horlicks Plus, focusing on lifestyle issues like diabetes, weight, and protein management, and ramping up our chemist and medical marketing programmes,” Jawa said. Boost will also be extended into new categories and rolled out wider.

Read this | HUL needs growth mojo. But demand conditions may play spoilsport

Margin moderation

Palm oil prices during FY25 were up 18% from FY24, whereas crude oil, soda ash, and skimmed milk powder saw lower prices. Tea prices rose 19%. If commodity prices stabilize at current levels, price growth may be in the low-single digit range, HUL said.

In the near to mid term, gross margin may moderate, HUL said.

“We will step up investments in market-making platforms, future channels, and strategic capabilities. Ebitda margin will be maintained in the 22–23% range. We believe this is the right time to accelerate investment to chart the next phase of growth for the company,” said Tiwari.

Analysts viewed HUL’s slight downward revision on Ebitda margin guidance as a negative. “Slight stance change by HUL seems to be on an Ebitda level; they are now talking about 22-23% Ebitda margin versus an earlier stance used to be 23-24%,” Roy of Nuvama Institutional Securities said. “We expect HUL to give better value to consumers in FY26. The focus will be on getting back to 4-5% volume growth in FY26 in our view,” he said.

For the full year HUL reported sales of ₹60,680 crore, and profit of ₹10,644 crore.

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