Hindustan Unilever margins rise as input costs fall, but ad spend rises.
Increases in Hindustan Unilever’s margins come despite the company’s increased spending on advertising and falling input costs. As a result of falling commodity prices, HUL’s gross margin has improved, but the company is investing more money in advertising and marketing.
The company Hindustan Unilever Ltd., which produces items such as Horlicks and Surf Excel, has recorded a rise in net profit of 8% year-on-year, to a total of Rs 2,472 cr. This gain was driven by a 3% increase in the quantity of products that were sold.
EBITDA, which is a measure of profit that excludes the influence of non-operating expenses such as interest rates and taxes, increased by 0.4 percentage points to 23.6% of sales and represents an increase to that proportion.
The increase in advertising and promotional spending was followed by an increase in gross margin of 1.40 percentage points, bringing the total increase to 1.10 percentage points.
The company was able to increase its end-product prices, which resulted in a 7% increase in overall sales as compared to the previous year.
The corporation reported that the markets for packaged consumer goods are “gradually recovering,” despite the fact that the operational environment “remained challenging.” Due to an increase in the cost of raw materials, HUL has been compelled in recent quarters to implement price increases.
According to the statement made by the company, “In the near term, the FMCG industry will continue to witness rebalancing of price-volume growth equation and a gradual recovery in consumer demand.”
“If commodities remain where they are, our price growth to be flattish or negative in the coming quarters,” it added. “If commodities remain where they are.”
It expected that competitive intensity may increase even further in the coming months, and it said that it is focused on maintaining its volume growth momentum. This indicates that it will quickly pass on to consumers any decrease in the prices of raw materials that occur.
However, it also stated that it will make an effort to establish the “right price-value equation” and restore its gross margin.
In addition to this, it forecasted an increase in the amount spent on advertising and promotional activities.
HUL’s profit before tax for the period of April to June increased by 9% year-over-year to a total of 3,365 cr, while EBITDA increased by 8% year-over-year to a total of 3,521 cr.
Strong performance was accomplished by Home Care this quarter, with revenue increasing by 10% and unit volume growth in the mid-single digits.
While the revenue from meals and refreshment climbed by 5% despite nearly unchanged volumes, the growth in revenue from beauty and personal care was 4%, and volume growth was in the mid-single digits.
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