Rural growth moderated in second quarter: HUL CMD Sanjiv Mehta

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#Hindustan Unilever Q2, #HUL Q2, #HUL Q2 earnings, #HUL Q2 results, #inflation, #Rural growth, Hindustan Unilever

REUTERS/Danish Siddiqui

Consumer demand in rural India, which was resilient since the onset of the pandemic, is now plateauing as the second wave of the pandemic wanes, Sanjiv Mehta, chairman of Hindustan Unilever, said at a media briefing after reporting the company’s results for the second quarter ended September.

“Rural demand for the last few quarters has been very resilient, led by government initiatives such as food subsidy, MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) outlay, direct benefit transfer scheme coupled with a decent harvest. Now, as mobility improves and urban markets see a pickup, rural centres, though they are still growing, their growth rates have moderated,” he said.

Consumer sentiment in the near term remains subdued due to the fear of Covid-19, the inflationary environment and job cuts, Mehta indicated, even as the country emerges from the second wave. Mehta said the next few quarters will provide a clear picture of the demand scenario in the country.

Quarterly performance

Hindustan Unilever reported an 8.9 percent year-on-year jump in net profit to Rs 2,187 crore in the three months ended September. Revenue from operations climbed 11.2 percent to Rs 12,724 crore.

A CNBC-TV18 analyst poll had estimated the company’s profit at Rs 2,175 crore and revenue of Rs 12,570 crore, with volume growth of 5-7 percent.

Sequentially, Hindustan Unilever registered an over 6 percent jump in net profit and a 6.7 percent rise in revenue from operations. The company continued to battle high input costs during the quarter as the prices of key commodities continued their upward swing.

(Also read: Hindustan Unilever Q2 profit jumps 9% to Rs 2,187 crore, revenue grows at 11.2%)

The company reported a 15 percent growth in the home care division, driven by high double-digit growth in fabric washes.

“Household care continued to perform well and grew on a strong base. Liquids and fabric sensations continue to outperform,” it said.

The company also took price hikes in the fabric wash and household care portfolios to partly offset high inflation in input costs.

Its beauty & personal care and foods & refreshment categories also performed well. Beauty & personal care grew 10 percent, led by skincare, colour cosmetics and hair care, while foods & refreshment grew at 7 percent against a strong base of last year.

Caution ahead

Given the high inflationary environment and subdued consumer sentiment, Hindustan Unilever has a cautionary stance for the way ahead.

“Inflation in certain commodities like palm oil, crude-based derivatives and ocean freight has been unprecedented. We haven’t seen this kind of inflation for many years,” said Mehta. “We endeavour to relentlessly focus on cost-saving and at the same time ensure that consumers remain within our franchise.”

The company remains cautiously optimistic for the quarters ahead.

“With the rapid pace of vaccination in the recent past, we are hopeful that as a nation, we can avoid further disruptions from the spread of the virus,” chief financial officer Ritesh Tiwari said. “The next few months will be key to getting a better understanding of underlying demand.”

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