Costs and tepid consumer demand weigh on HUL Q4

CEO and MD Rohit Jawa
| Photo Credit:
Ebenezer Stephen Duraiappah B 10801@Chennai

High input costs and subdued urban demand continued to keep the brakes on fast-moving consumer goods bellwether Hindustan Unilever, which saw a fall in net profit in Q4 on weak underlying volume growth. Operating margin also shrank, and it cuts its margin forecast with higher investments planned on high-growth demand spaces.

HUL’s consolidated net profit in Q4 fell 3.67 per cent to ₹2,464 crore and revenue from operations rose 3 per cent to ₹15,670 crore on underlying volume growth of 2 per cent. Its operating margin was down 30 bps at 23.1 per cent. In the near to mid-term the company has pegged EBITDA margin at 22-23 per cent down from the earlier estimate of 23-24 per cent.

The company attributed the impact on the margins to elevated input costs in categories including tea, coffee and skin cleansing.

“While prices for palm oil and skimmed milk powder were deflationary, tea saw 20 per cent year-on-year inflation, and coffee remained high. Instead of completely passing the burden of increased raw material costs to consumers, HUL opted for smaller, staggered price hikes, leading to a price vs cost mismatch that dented gross margins,” the company said.

In a media interaction CEO and MD Rohit Jawa said that macro indicators for the economy including forecast of an above normal monsoon presaged a return to consumption demand. Later in an analyst call Jawa said that the new Unilever CEO Fernando Fernandez was bullish was about India, which he wanted to build as one of the key markets as part of the Anglo-Dutch firm’s overall strategy. Fernandez, who took over as Unilever CEO on March 1, sees India and US as the anchor markets. 

Final dividend

The board of directors recommended a final dividend of Rs 24 per share.

In the near to mid-term, HUL expects growth to gradually improve with portfolio transformation actions and improved underlying macro conditions. “We anticipate the first half of FY26 to be better than the second half of financial year 25. If commodities remain where they are, we expect price growth to be in the low single-digit range,” it said.

Home care, the largest revenue contributor, saw high single digit volume growth but other segments such as food, beauty & wellbeing and personal care sales were sluggish.

HUL’s recently acquired D2C brand Minimalist recorded a turnover of over ₹500 crore in FY25.

Rural/ Urban Growth & Investment

“We believe this is the right time to accelerate investment as we chart the future course of growth of the company in the backdrop of portfolio transformation actions and improving macro environment,” HUL stated in a media briefing.

The FMCG major’s investments in coming quarters is in anticipation of urban and rural buyers increasing their spending with tax rebates, low interest rates, and receding food inflation.

“Rural markets have essentially recovered and are resilient and robust over the last few quarters. The monsoons are projected to be decent again. Agriculture output is strong. Reservoirs are full. We believe that this will be an important trigger, given that companies like ours do have a very large rural-facing portfolio,” said Jawa.

While urban demand continued soft, Jawa said macro triggers were positive, and food inflation had shown a sharp fall. The drop in interest rates, and the tax relief for consumers were factors that would work well for consumption. “We believe that this is a good time for us to lean in and invest in growth.”

Premium trend

The company has seen a decline in the premiumisation trend during the quarter, but stated that the premium products are growing strongly.

“Premiumization is still ahead. The premium segment is still ahead of the average market growth, but the distance has come down in the recent quarters. Small packs are growing faster. It is also led by the fact that rural areas are growing faster than urban areas. And large packs in some of the many other categories are also growing,” said Rohit.

Quick commerce

While the company noted that quick commerce and e-commerce are growing fast, it noted that the general trade comprises 70 per cent of its business.

“ QuickCommerce is still a small share of our total business. General Trade is the large majority, that’s the heart of our business. We are very kirana-centric and distributed, inclusive in that model. More than two-thirds of our business goes to General Trade. We do well when the general trade does well,” added Rohit.

Published on April 24, 2025