Hindustan Unilever Ltd. posted an underwhelming quarterly profit weighed down by muted consumer demand during India’s scorching summer season and rising inflation.
The Indian unit of Unilever Plc saw net income rise 2.8 percent to 25.4 billion rupees ($303 million) for the quarter ended June 30 compared with the same period a year ago, according to an exchange filing Tuesday. That fell short of the average analyst estimate of 26.01 billion rupees based on a survey compiled by Bloomberg. The earnings were also boosted by a 39 percent jump in other income to 2.57 billion rupees.
The consumer giant — often seen as a bellwether for local demand — posted a 1.6 percent climb in revenue to 151.7 billion rupees during this period, missing analyst estimates. Total costs also advanced 1.6 percent to 121.2 billion rupees. Volume growth came in at 4 percent this time versus 3 percent in the same period last year as the company witnessed some green shoots.
The tepid results covered a three-month period when the South Asian nation held its general elections, a period when government spending and welfare distribution to the country’s poor tend to dip temporarily.
India’s largest maker of household staples has been struggling with sluggish consumer demand in recent quarters and choosy urban consumers who have been switching to niche products. India also witnessed hotter-than-usual temperatures in the June quarter, which impacted the company’s food and beverages business.
Rohit Jawa, chief executive officer, tried to give a positive spin to the earnings by highlighting the “gradual recovery of rural markets.” “We remain confident of the medium- to long-term potential” of the Indian consumer goods sector, he said.
“In many of our very highly rural-focused portfolios, such as hair care, low unit price packs, personal wash and laundry portfolio have all done well in volume terms,” Jawa said.
Revenue for the home-care division — the biggest contributor to the top line — grew 4.6 percent to 56.8 billion rupees in the June quarter, while foods and beverages rose 1.3 percent to 38.5 billion rupees. Beauty and personal care saw its revenue slip 0.3 percent to 55.85 billion rupees.
Hindustan Unilever’s shares jumped 9.2 percent in the June quarter, surpassing the 7.3 percent climb in the benchmark S&P BSE Sensex. The stock has gained almost 4 percent this year.
Indian demand for consumer staples has appeared to improve, while discretionary spending remains under pressure, analysts at HDFC Securities Pvt. wrote in a note earlier this month. The brokerage expects companies like Hindustan Unilever to continue spending heavily on advertising and spending in the next few quarters, eating into their profits.
By Advait Palepu
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