HUL Warns Of Further Price Hikes, Sees Sequential Inflation In September Quarter

Hindustan Unilever Ltd. continues to face a double whammy of subdued demand and elevated prices, which is prone to dent its margins within the present quarter and end in additional value hikes, in accordance with its CEO Sanjiv Mehta.

“Inflation hasn’t gone away…most commodities stay elevated and there may be now one other issue that’s rupee depreciation which might influence commodities and enhance enter prices for us,” Mehta, chief govt officer and managing director of Hindustan Unilever, informed reporters in post-earnings name on Tuesday.

At the same time as palm oil costs fell from its peak, the working situations proceed to be impacted by inflation in a number of different commodities, comparable to crude oil, milk extracts, espresso, barley, polyethylene, caustic soda and vegetable oil.

“With most commodities remaining elevated and consumption of upper price pipeline stock, the September quarter will see extra inflation than the June quarter, and margins will stay underneath stress,” mentioned Ritesh Tiwari, chief monetary officer at HUL.

Companies sometimes function with 4-12 weeks of stock relying upon the fabric. In line with Tiwari, the correction in spot costs won’t instantly mirror within the books as HUL has already booked stock. Therefore, the constructive influence of decrease palm oil costs and potential softening of different commodities will probably be seen from the December quarter onwards.

There’s a vast hole between value and price.

The web materials inflation was 20% of complete price, whereas the value progress stood at 12% in Q1, in accordance with the corporate.

“We count on web materials inflation within the Dec. quarter to be decrease sequentially, however we would wish to attend and watch how the commodities play out within the subsequent few months to get a way of the precise quantum of discount,” Tiwari mentioned.

The value of crude oil was up 60% year-on-year within the June quarter, in accordance with the corporate presentation.

Caustic soda costs have been 125% increased, whereas polyethylene and palm oil have been up 25% and 50%, respectively, over the earlier yr.

As price stress persists, the administration mentioned it might take a look at additional calibrated value hikes in “choose classes” to cushion margins.

Excessive inflation is impacting consumption throughout rural and concrete markets. “On a year-on-year foundation, the market progress has been led by costs whereas volumes have declined. In comparison with pre-pandemic ranges, the volumes remained flat and rural markets proceed to lag city (markets),” mentioned Tiwari, including that the expansion within the near-term will stay value pushed.

Gross sales of the corporate’s house care merchandise, together with manufacturers comparable to Surf Excel and Vim, jumped practically 30% to Rs 4,931 crore, whereas the sweetness and private care section grew 17% to Rs 5,364 crore. Meals and refreshments class grew 9% on a excessive base to Rs 3,627 crore, in accordance with the corporate.

The fast-moving shopper items section fell 5% within the three months ended June. The sector is now pinning its hopes on the forecast of a traditional monsoon and better farm earnings to tide over the slowdown.

“There are specific pockets, particularly the central belt, the place the rainfall has been lower than common. But when that catches up, it’s going to augur properly for rural consumption,” mentioned Mehta.

He expects authorities initiatives, comparable to increased fertilizer subsidy, to end in increased web earnings for farmers, spurring consumption.