The rural market is showing some signs of improvement on easing inflation, robust sowing of winter crops and an increase in farm incomes, Hindustan Unilever’s brass told mediapersons after announcing better-than-expected numbers for the December quarter.
Value growth in rural markets was 5 percent year-on-year in the December quarter while volumes declined by 7 percent. “There is a long way to go before rural volumes come back, but we are definitely seeing some green shoots. In the July 2022 quarter, value growth in the rural market was negative 2 percent,” HUL chief executive officer Sanjiv Mehta said.
The FMCG behemoth's net material inflation (NMI) in the December quarter came down to 18 percent. In the June quarter it stood at 20 percent and , climbed to 22 percent in the September quarter. “The worst of inflation is behind us,” Mehta said.
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As raw material prices eased, the company cuts soap and tea prices in the December quarter. “As inflation moves southwards, our gross margins improved but we did not pass it all to the bottom line and we increased our ad spends,” he said.
The management said the company was witnessing three key consumer trends: downgrading to lower unit packs in rural areas, a shift to larger packs by people with more disposable income and premiumisation in urban areas.
“Ice cream business has bounced back strongly. This is an indicator of people stepping out and out-of-home consumption increasing,” Mehta said.
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That said, the company’s near-term outlook is "cautiously optimistic". “We remain focused on managing our business with agility, continue growing our consumer franchise whilst maintaining margins in a healthy range,” the top boss added.
HUL’s main focus will be to protect consumer franchise while protecting its business model of growth-led double-digit earnings per share model, the management said.
The company reported a 12 percent year on year increase in standalone net profit at Rs 2,505 crore for the December quarter. Its standalone revenue from operations came in at Rs 15,228 crore, up 16 percent against Rs 13,092 crore logged in the corresponding quarter of the previous fiscal.
The numbers beat estimates. A poll of brokerages had estimated standalone revenue at Rs 14,904 crore, up 13.8 percent YoY, and profit after tax of Rs 2,481 crore, an increase of 8.3 percent YoY from the year-ago quarter.
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