HUL sales cross Rs 50K crore in FY22 but margins & volumes suffered in Q4

Leading fast moving consumer goods (FMCG) company Hindustan Unilever (HUL) reported a double digit surge in its sales for FY2021-22, however, mounting cost pressures impacted its profitability at the second half of the financial year. 

During the year, HUL’s net sales grew 11.2 per cent year-on-year (YoY) to Rs 51,468 crore - crossing the Rs 50,000 crore mark for the first time. While its net profit stood at Rs 8,892 crore - up 11.1 per cent over Rs 7,999 crore it had posted in FY20-21. 

Performance during the recently concluded January-March quarter remained subdued, although its net sales surged by 10.2 per cent to Rs 13,468 crore from Rs 12,220 crore during the corresponding previous year. Its profit margins squeezed due to steep rise in cost of materials. HUL’s cost of materials surged 18 per cent to Rs 4,501 crore for the quarter.

As a result, its gross margin compressed by 331 basis points, while EBITDA (earnings before interest, tax, depreciation and amortisation) margin declined by 20 basis points. Net profit margin went down to 17.13 per cent from 17.92 per cent - compressing by 79 basis points YoY. The company reported Rs 2,307 crore net profit for Jan-Mar quarter - 5.3 per cent higher than Rs 2,190 crore it had posted in the corresponding quarter the previous year. One basis point is 100th of a percentage point.

According to Sanjiv Mehta, Managing Director and Chief Executive Officer, HUL, offtake at the rural markets remained subdued during the period. 

“In rural market, it has been a very muted quarter, where value growth was nearly flat and volume growth was in negative”, he said. Mehta also added that in spite of operating in “challenging circumstances”, HUL managed to grow “competitively and protected our business model by maintaining margins in a healthy range”.

“While there are near term concerns around significant inflation and slowing market growth, we are confident of the medium-to-long term prospects of the Indian FMCG sector”, he added. Citing data from market research firm Nielsen, the company management also said that HUL has gained shares during the quarter - both in terms of value and volume.

As per Edelweiss Securities’ analysis, overall volumes remained flat for HUL during the March quarter, which is higher than its estimated 2-3 per cent fall in volume uptake for the company.