Hindustan Unilever has posted quarterly profit in line with market estimates, enhanced by a broad economic recovery that was dominated by warnings of inflationary challenges ahead. Net income for the Mumbai-based unit of Unilever rose 9% to Rs. 2,190 crore ($291 million) in the quarter ended September. That nearly matched the average 22 billion rupees forecast by analysts in a survey by Bloomberg.
Revenue advanced 11% from the year-ago period to Rs. 12,520 crore while costs jumped 12%. Benefits from a rebounding economy as lockdown-weary Indians finally started stepping out were offset by the unprecedented rise in raw material prices for the HUL.
The company’s management indicated that these inflationary conditions were likely to continue, shocking investors. Chairman and Managing Director Sanjiv Mehta said that the quarter witnessed a consecutive improvement in trading conditions, although it continued to be challenging with unprecedented levels of input cost inflation and subdued consumer sentiments. “We haven’t seen this kind of inflation for many years,” he added on.
In July, the parent group warned that costs for raw materials that go into shampoo, detergents and ice cream were increasing at the fastest pace in more than a decade, forcing Unilever to scale back profitability goals.
“Calibrated price increases and a laser-sharp focus on savings have helped us protect our business model,” Mehta informed. While high input prices have been eating into its margins, Hindustan Unilever has benefited from a rebounding local economy and an ease in movement restrictions as daily Covid infections slipped to less than one-tenth of the fresh cases reported in early May.
Retailers in India are anticipating rising demand in coming weeks which may boost the consumer goods sector. Companies are adding staff in warehouses as well as in their delivery hubs as Diwali is here since the country’s two massive Covid outbreaks confined millions to their homes.
The Reserve Bank of India expects the months-long festival season to bolster urban demand in the second half of the financial year to March 2022, while rural demand will likely be buoyed by a robust monsoon and record food grain production.