HUL Q2 net up 8% at Rs1,967 cr despite lockdown effects

Hindustan Unilever Ltd has reported an improvement in profit and sales during the fiscal second quarter ended 30 September 2020 with some respite in the lockdown restrictions. HUL’s consolidated net profit rose 8 per cent year-on-year to Rs1,967 crore in the three months ended September, according to an exchange filing.

Growth in both volumes and the bottom line was aided by HUL’s acquisition of Horlicks from GlaxoSmithKline Plc in April.
HUL’s health, hygiene and nutrition segment, which is 80 per cent of its portfolio grew 10 per cent in the September quarter, on a year-on-year basis. Also, the trend of contraction in its remaining 20 per cent portfolio, which is in the discretionary category, narrowed to 25 per cent y-o-y compared to a 45 per cent decline in the June quarter.
HUL saw better demand for goods in rural areas than in urban areas, especially metros, which was muted in the September quarter. The company expects demand for items such as skin care and deodorants to improve as people start moving out of their homes. 
while rural demand is expected to grow faster than urban demand, HUL’s management is cautiously optimistic on future demand recovery.
Consolidated revenue rose 15.6 per cent over a year earlier to Rs11,683 crore, compared with the estimated Rs11,154 crore.
Operating profit rose 16.6 per cent to Rs2,925 crore. Margin expanded to 25.1 per cent from 24.8 per cent a year ago.
The company has also declared an interim dividend of Rs14 per share for 2020-21. The company expects future demand growth to be slower.
“In the context of a challenging economic environment, our growth has been competitive and profitable,” Sanjiv Mehta, chairman and managing director at HUL, said in a post-earnings call. “Rural markets have been resilient but demand in urban markets, especially metros has been muted.”
Moreover, the company is witnessing raw material inflation in some of the categories and this could put pressure on gross margin going ahead if input cost continues to rise, HUL added.