Hindustan Unilever (LON:ULVR) (HUL), India's leading fast-moving consumer goods (FMCG) firm, announced on Friday, October 20, 2023, a strategy to reduce product prices in response to lower raw material costs. This decision was disclosed during their Q3 earnings call on Thursday, October 19, 2023. HUL's CFO, Ritesh Tiwari noted price cuts primarily on single and multi-packs in the soaps and laundry categories, while coffee and dairy products saw price hikes due to rising costs.
HUL, a prominent player in the Personal Care Products industry, according to InvestingPro Tips, has been consistently increasing earnings per share. In the face of inflationary pressures and tepid rural demand, HUL's net profit for the quarter rose by 3.86% YoY to Rs 2,717 crore ($326.5 million). This was achieved despite previous increases in prices to counteract rising raw materials costs, especially palm oil. The company's EBITDA grew by 9.4% YoY to Rs 3,694 crore, with an EBITDA margin increase of 130 basis points to 24.5%, aligning with InvestingPro's data showing an EBITDA of 193.76M USD and an EBITDA growth of 32.59%.
On the same day, HUL reported a Q3 sales growth of 3% and 4% in the home care and beauty & personal care segments respectively. A mid-single-digit decline was observed in its food and refreshment business. CEO Rohit Jawa forecasts a steady recovery due to the festive season, ongoing service buoyancy, and government capex initiatives, echoing InvestingPro Tips that highlight HUL's impressive gross profit margins and its ability to maintain dividend payments for 23 consecutive years.
In contrast to the FMCG market's 8% growth, HUL's volume growth was just 2%. CEO Rohit Jawa stated that while HUL gained market share in over 75% of their portfolio in volume terms, it lost some share in the mass segment. To counter competition from smaller brands, CFO Ritesh Tiwari revealed a Rs 700 crore increase in ad spend, leading to a 420 basis points increase in Advertising and Promotions expenses.
On the same day, amidst high inflation and rural demand slowdown in Q2FY24, FMCG companies ITC and Nestle India reported strong sales and profits, while HUL saw a minor profit dip. Despite a 0.48% drop in consolidated net profit to Rs 2,657 crore, HUL's total income increased to Rs 15,806 crore, representing a revenue growth of 44.1% as per InvestingPro data.
Adjustments have also been made to HUL's health food drinks (HFD) portfolio pricing amidst these market changes, despite brokerages' concerns. CEO Rohit Jawa expressed cautious optimism for a gradual FMCG demand recovery fueled by sustained services buoyancy and government initiatives. He warned about the potential impacts of volatile global commodity prices and monsoon on crop output and reservoir levels. For more insights like these, consider exploring InvestingPro which offers 20 additional tips for HUL and other companies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.