HINDUSTAN Unilever, India’s biggest household products maker, reported second-quarter profit that missed expectations amid a lingering spell of weak demand for consumer goods.
The Indian unit of Unilever saw net income rise to 26.1 billion rupees (S$411 million) in the three months ended Sep 30, down 4 per cent from a year ago, according to an exchange filing on Wednesday (Oct 23). That fell short of the average analysts’ estimate of 27.1 billion rupees in profit.
Revenue for the company, regarded as a bellwether for local market sentiment, rose 1.9 per cent to 153.2 billion rupees during the period, also missing estimates. Total costs rose 2.9 per cent to 122.7 billion rupees.
Volume growth came in at 3 per cent in the quarter versus 2 per cent a year ago. It announced a dividend per share of 29 rupees.
The profit miss comes amid a downturn in sales of everything from snacks and coffee to cars in India. The seller of Dove soap to Knorr soup is betting on demand in India’s rural areas outpacing urban centres to help support sales. Rural incomes are expected to have improved on the back of ample monsoon in the past few months.
Rural areas make up a third of its business, while urban India contributes the rest, Chief financial officer Ritesh Tiwari said in a media call after the earnings.
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In the September quarter, consumer goods’ “demand witnessed moderating growth in urban markets while rural continued to recover gradually”, Rohit Jawa, Hindustan Unilever’s managing director said in a post-earnings statement. “We remain watchful of a gradual recovery in consumer demand.”
While its home care and beauty & wellbeing business expanded with single-digit growth, its personal care and food business declined. A recovery in demand will take “a few quarters”, Tiwari said.
Hindustan Unilever will be carving out its ice cream business as part of a portfolio restructuring, the company said in a separate filing on Wednesday. This aligns with the parent Unilever’s plans to separate its global ice cream business across jurisdictions.
This portfolio restructuring will enable the company “to sharpen focus on the core business and further strengthen its play in trending demand spaces such as beauty, foods, health and wellbeing”, the Indian unit said. The firm will decide the mode of separation by the end of this year, it said.
Shares of Hindustan Unilever have slipped 0.2 per cent this year, making it among the worst performers on the benchmark S&P BSE Sensex, which has climbed almost 11 per cent. The parent’s shares declined as much as 2.7 per cent in London after the earnings were announced. BLOOMBERG
