Hindustan Unilever warns of margin pressure; rural slowdown persists

A pedestrian walks past the Hindustan Unilever Limited (HUL) headquarters in Mumbai January 19, 2015. REUTERS/Danish Siddiqui

BENGALURU, Jan 20 (Reuters) – Hindustan Unilever (HLL.NS), India’s largest consumer goods maker, said sales in its segments that make ice creams and beauty products returned to pre-pandemic levels but warned high raw material costs and inflation could pressure margins in the near term.

Consumer goods makers had expected buying to pick up as pandemic restrictions eased, but high inflation has limited consumers’ spending power and piled pressure on companies already grappling with rising raw material and shipping costs.

HUL said it would continue calibrated price hikes, in line with moves at consumer goods peers.

While the company had gained market share in both urban and rural markets during the quarter, it said demand from rural India had lulled, calling for an extension of certain support measures the government had extended at the onset of the pandemic.

The company, which owns more than 50 brands in India spanning breakfast spreads to personal hygiene products, said sales in its beauty and personal care segment rose 6.9%, while those from home care jumped 23%, pushing total sales up 10.4% to 129 billion rupees.

Calibrated price increases across household care portfolios and skin care helped offset the significant inflation in input costs, the company said.

HUL, the Indian unit of British consumer goods giant Unilever (ULVR.L), logged a profit of 22.43 billion rupees ($301.01 million) for the three months ended Dec. 31, compared with 19.21 billion rupees a year earlier.

Consumption in out-of-home and discretionary categories has come back and started to grow above pre-pandemic levels, Chief Financial Officer Ritesh Tiwari told reporters in a post-earnings call.

HUL’s earnings before interest, taxes, depreciation and amortization margin, a key measure of profitability, was 25.4% in the third quarter, above analysts’ estimates of 24.69%.

($1 = 74.5160 Indian rupees)

Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu and Maju Samuel

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