HUL needs rural spark, lower input costs to drive volume push
FMCG bellwether HUL posted a subdued performance, with a 1.6% increase in revenue and a 2.7% increase in net profit.
The operating profit margin stood at 23.8% — 20 basis points higher than the year-ago level. One basis point is a hundredth of a percentage point.
HUL closed 1.8% lower on Wednesday.
Incidentally, the silver lining has been the underlying volume growth at 4% — the highest in the past five quarters — aided by the spending on advertising and promotion. The company spent nearly 11% of its revenues on advertising. It took price corrections especially in fabric wash and household care products — passing on the benefit accruing from the softening of commodity prices.
While the revenues of the home care, beauty & wellbeing and food & refreshment segments grew in low single-digits, that of personal care declined by 4.5% due to price cuts.
In terms of profitability, the home care and food & refreshments segments posted an increase in their segmental margins while the beauty and personal care portfolio faced a decline. The food and refreshment category was impacted by a harsh summer season.
HUL is driving premiumisation across its portfolio in terms of leading trends, leveraging technology and delivering new formats and benefits. During the quarter, the company re-launched brands such as Vim, Lux and Lifebuoy with superior formulations. In fact, the contribution of its premium portfolio has increased by 300 bps over the last three years. It has reshaped its portfolio in certain high-growth categories.
