Hindustan Unilever Ltd.’s shares fell after India’s largest consumer goods company reported quarterly profit that missed analyst estimates as inflationary pressures continued to weigh on demand.
(Bloomberg) — Hindustan Unilever Ltd.’s shares fell after India’s largest consumer goods company reported quarterly profit that missed analyst estimates as inflationary pressures continued to weigh on demand.
The Mumbai-based unit of Unilever Plc posted a 9.4% rise in net income to 25.5 billion rupees ($312 million) for the quarter ending March 31, according to an exchange filing on Thursday. A Bloomberg survey of analysts had forecast an average profit estimate of 26.37 billion rupees. The stock slipped as much as 2.1% during trading after the earnings.
Revenue rose 11% to 146.4 billion rupees compared with the same period last year, while costs also climbed 11% to 117.1 billion rupees. The firm posted volume growth of 4% for the quarter.
The disappointing earnings dent earlier claims by outgoing Chief Executive Officer Sanjiv Mehta that the maker of Dove soaps and Lipton tea had seen through the worst of India’s inflationary headwinds. Indian consumers have also been hit by rising interest rates that has curbed their spending power.
“The near-term operating environment is likely to remain volatile,” Mehta said in a statement. “Market volumes will recover gradually as consumption habits readjust.”
IMF Sees Slowing Consumption Hitting India’s Growth Momentum
Consumption demand in India is cooling even though the coronavirus pandemic’s impact on the economy was short-lived, Nada Choueiri, the International Monetary Fund’s mission chief in India, told Bloomberg Television in April.
Hindustan Unilever’s 4% headline volume growth comes at a time when India’s overall consumer goods market stagnates, with sector-wide rural market volumes down 3% compared to last year, according to an investor presentation the company filed on Thursday.
‘Bottoming Out’
India’s hinterland, where roughly 70% of the country’s 1.4 billion people live with limited disposable income, has been hit by two years of “unprecedented inflation,” Hindustan Unilever’s Chief Financial Officer Ritesh Tiwari told reporters on Thursday. At the same time, the “rural slowdown is bottoming out,” he said. “It’s going in the right direction.”
Meanwhile, Hindustan Unilever, like its London-based parent, is undergoing a management shift as Mehta retires after a decade-long stint at the top. He will be replaced by Rohit Jawa, who was most recently the chief of transformation at Unilever in London. Jawa begins a five-year term at the Indian unit at the end of June.
Unilever Names Jawa as Successor to CEO Mehta in Key Indian Unit
Jawa is set to take over as Unilever faces fierce competition in India from Mukesh Ambani and Gautam Adani — two of the country’s most powerful billionaires — as well as sprawling conglomerates such as the Tata Group, which are all expanding rapidly across the sector.
(Updates with CFO comments in the eighth paragraph.)
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