Subdued consumption to weigh on HUL despite rural pickup
Hindustan Unilever (HUL) posted a third consecutive quarter of disappointing performance this fiscal with 2% growth in revenues and flat volume growth. The net profit growth would have also been flat but for the profit from the divestment of the Pureit water-purifier business. The Ebitda margin dropped 20 bps to 23.5% under pressure from increased raw material costs.
While urban demand continued to remain subdued, rural demand sustained its gradual recovery. Downtrading took place with small packs growing ahead of large packs. HUL's home care segment posted high single-digit volume growth, while the beauty and wellbeing segment posted a low-single-digit volume decline and the personal care and foods segments each posted a mid-single-digit volume decline.
The company has announced the ₹2,955 crore acquisition of premium beauty brand Minimalist, one of the fastest-growing digital-first brands that has been profitable since its inception. This buyout, though timely and suitable for beefing up HUL's beauty and wellness portfolio, comes at a rich valuation of around 6 times the annual revenue run rate of ₹500 crore generated by the five-year-old startup.
Through this high-value acquisition of a DTC brand, the company is effectively buying growth to counter the current face of underperformance in the wake of subdued consumer demand.
HUL has also acquired a Telangana-based palm undertaking as a part of its palm localisation strategy. This backward integration move involves setting up sapling nurseries, palm fresh fruit
