Consumer firms get an urban glow in Q2

Earnings of Hindustan Unilever Ltd (HUL), the country’s largest household goods maker, underscored the resilience of urban markets despite the lingering effects of the pandemic.

“We see a very resilient consumer when it comes to urban metros, higher income households, and there are high levels of growth across the board,” said Rohit Jawa, managing director and chief executive of HUL, in a post-earnings call with reporters on Thursday. “Markets are recovering, and it’s recovering faster in urban and lesser in rural.”

HUL reported a 4% increase in profit in the September quarter, in line with analysts’ expectations. Standalone net profit climbed to ₹2,717 crore for the three months ended 30 September from ₹2,616 crore a year ago, the company said in a statement to the stock exchanges. Sales rose 4% to ₹15,027 crore from ₹14,514 crore in the year-ago period, while advertising and promotion spending increased 11.4% to ₹1,720 crore during the quarter.

The company said it delivered a “resilient and competitive performance” in the quarter, with an underlying volume growth of 2%. Operating margin widened 130 basis points to 24.6% from a year earlier.

HUL reported urban volume growth of approximately 10% this quarter, building on a 3% decline during the same period last year. But on a two-year basis, urban volume growth averaged 3%. Meanwhile, rural volume growth was at 7%. However, HUL said rural volume growth averaged -1% from a two-year perspective.

HUL, however, expressed optimism about demand recovery, counting on the upcoming festive season, service sector growth and government-driven capital expenditure initiatives. Nonetheless, HUL is monitoring global commodity price fluctuations and the impact of monsoon patterns on crop output and reservoir levels.

Urban markets showed growing demand for premium products. Premium categories, which previously comprised 25% of business, have now increased to nearly one-third, chief financial officer Ritesh Tiwari said.

Meanwhile, Nestlé India, the country’s largest packaged foods company, has expanded its market reach to smaller towns and villages, an approach the company terms ‘rurban’, resulting in a 9.5% increase in total revenue for the quarter from a year earlier.

Suresh Narayanan, chairman and managing director of Nestlé India, said domestic sales saw double-digit growth, led by key brands like Kitkat, Nescafe Classic and Nescafe Sunrise. However, Nestlé said it remains cautious as uneven rainfall and rain deficits could affect maize, sugar, oilseeds and spices production, stoking inflation.

The Indian unit of the Swiss company posted a total revenue of ₹5,036.8 crore for the quarter, marking a 9.5% increase from ₹4,601.8 crore in the corresponding period of the previous year.

“Domestic sales grew in double digits on account of mix, volume and price. Key brands continued to perform well, led by Kitkat, Nescafe Classic, Nescafe Sunrise, supported by Munch and Milkmaid,” Narayanan said. “We crossed ₹5,000 crore turnover, which has been our first in any quarter in the history of the company and a landmark for us.”

Domestic sales increased by 10% to ₹4,823.72 crore from a year earlier, while exports declined by 9.56% to ₹185.80 crore. Profit surged 37% to ₹908 crore in the quarter ended 30 September.

Meanwhile, for ITC, the FMCG business (excluding cigarettes) reported an 8.3% increase in revenue in the quarter that ended 30 September to ₹5,291.60 crore, compared to ₹4,884.76 crore in the year-ago period, while the segment Ebitda was at ₹580.79 crore (from ₹463.20 crore in the year-ago period).

All the FMCG companies have had to navigate high volatility in coffee prices due to global supply shortages. Nonetheless, Nestlé India anticipates a healthy milk flush during the winter, which should help stabilize milk prices.

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Updated: 20 Oct 2023, 12:31 AM IST