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HUL Q1 takeaways: Rural demand resilient, but inflation concerns remain – CNBCTV18

Despite the second COVID-19 wave ravaging rural areas, the management of Hindustan Unilever Ltd (HUL) said FMCG demand was significantly impacted in May, but rebounded in June to March 2021 levels led by rural demand.

The FMCG major said markets have remained resilient and are now recovering ahead of urban markets. Urban markets were impacted in the quarter on the back of restricted timings for stores, which impacted footfalls.

However, Ritesh Tiwari, the chief financial officer of HUL said the company continued to see unprecedented inflation in key input materials with some commodity prices being at 20-year highs. This, he added, led to the company taking calibrated price increases during the quarter in its tea, skin cleansing and laundry products.

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HUL reported its April-June quarter earnings on Thursday clocking a 9 percent volume growth, a domestic consumer growth of 12 percent and 10 percent growth in its profit after tax over the same quarter last year. The company’s growth comes despite a strong base in the April-June quarter of last year where HUL saw significant growth on the back of consumer stocking amid the first wave of COVID-19.

While Q1 this year saw the second COVID-19 wave at its peak, the company said it was better prepared in terms of its supply chain and that discretionary and out-of-home (OOH) categories were relatively less impacted this time compared to last year, clocking high double-digit growth.

However, even as the market growth is returning to March 2021 levels, HUL said any surge in infection rates may cause uncertainty in demand. “Looking forward, we remain cautiously optimistic about the demand recovery. Our focus firmly remains behind delivering volume-led competitive growth and margins in a healthy range,” Sanjiv Mehta, chairman and managing director of HUL said.

In terms of its categories, HUL’s management said all its key brands grew in high double digits despite a strong base, especially led by its premium brands. Health hygiene and nutrition which makes up 85 percent of HUL’s business grew at 8 percent, the company said.

The home care category grew at 12 percent on the back of its fabric wash products. The company said it has taken calibrated price increase across fabric wash and household care portfolio to partly offset the high inflation in input costs.

However, HUL’s hand hygiene portfolio, which includes sanitizers, declined against an exceptionally high base. This is because the demand for sanitizers was through the roof in the same quarter last year.

Despite people being at home during the second wave, HUL’s beauty & personal care category grew 13 percent led by hair care and skincare, both growing in high double-digits.

With discretionary categories being relatively less impacted, ice-creams saw a recovery compared to a complete washout last year but was still impacted by limited mobility.

Tiwari also alluded to the company’s increased focus on digital with a heightened adoption of e-commerce with its contribution to sales doubling over last year.

At a time when FMCG companies across the board are improving their direct-to-consumer reach with digital-first brands, Tiwari said the company too, has increased focus on digital-first brands, especially in the personal care and beauty categories, “Ten percent of our overall demand is now captured globally.”