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HUL sales growth hits a 7-quarter low in Q1

Says weak consumer sentiment and slow wage increases limited pace of expansion; expects demand to remain soft in short term.

ET Bureau|
Jul 24, 2019, 06.35 AM IST
Sales in HUL’s beauty and personal care business, which accounts for nearly half its overall sales, rose a tepid 4% to Rs 4,626 crore.
MUMBAI: Hindustan Unilever (HUL) on Tuesday posted a 15% increase in quarterly net profit, but a moderation in both urban and rural demand slowed the pace of sales growth to a seven-quarter low of 7%.

India’s biggest pure-play consumer goods company called its performance “resilient”, even as it predicted demand to be soft in the short term. Net sales were Rs 9,984 for the three months through June, and higher volumes accounted for nearly two-third of incremental growth, consistent with HUL’s expansion strategy over past couple of years.

Still, at 5%, volume growth was also the lowest in seven quarter. The maker of Rin detergents and Lux soap posted a net profit of Rs 1,755 crore.

During the April-June quarter in 2018, HUL had posted 16% sales growth with 12% volume expansion. The local unit of Anglo-Dutch Unilever, long considered a proxy for broader consumer sentiment in India, said macroeconomic factors such as declining liquidity and slower wage increases restrained sales growth, but government measures should boost rural income.

“FMCG is not completely delinked to the state of the economy. But it is not a doomsday scenario,” chairman Sanjiv Mehta said after the earnings were announced.

“There could be various factors — food inflation has been very tepid, rural wages over the last five years have been modest and those would have been the primary contributing factors as to why there has been a slowdown in rural.”

Last week, market research firm Nielsen lowered its growth forecast for the fast-moving consumer goods market to 9-10% in 2019 from its previous outlook of 11-12%, citing a sharp rural slowdown.


Consumption in rural India, which accounts for about a third of the market, has been under stress over the past three quarters, even though its rate of expansion has been faster than that in the cities. Rural growth rates, which were nearly double those in urban areas, moderated to one-and-half times in the December quarter and to about 1.2 times in the March quarter. That has further slowed and is now on a par with that in urban areas, HUL said. “We would like to believe the second half of the fiscal would be better than the first half,” Mehta, who is also its MD.

Over the past decade, sales of branded daily needs in the nation of 1.3 billion people have increasingly relied on the rural hinterland, home to more than 800 million, whose purchase behaviour is largely linked to farm output.

The farm economy has been under strain. Agricultural production expanded 2.7% year-on-year in the October-December quarter, the lowest in nearly three years.

The company should grow ahead of the market once rural demand recovered, said Abhijeet Kundu, an analyst at Antique Stock Broking. “The quarterly performance was in line with expectations although the soaps segment has been a drag.”

Sales in HUL’s beauty and personal care business, which accounts for nearly half its overall sales, rose a tepid 4% to Rs 4,626 crore, as the personal wash or soaps segment dragged value growth after it took price cuts to pass on lower raw material costs. The homecare segment expanded 10% to Rs 3,464 crore.

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