HUL Q2 results update!

• Profit rises: HUL’s net profit rose 9% on-year to ₹2,009 crore in Q2FY21, largely in line-with street expectations. Analysts had earlier estimated a profit of about ₹2,000 crore. Revenue rose 16% on-year to Rs ₹11,442 crore.
• Numbers aided by GSK CH India merger: Domestic consumer growth (excluding the effect of the merger) grew by just 3% in the quarter. Synergies arising from the GSK merger helped to sustain EBITDA margins at a healthy 25% level (up 30 bps). The company completed the merger in April getting brands like Horlicks and Boost under its belt. HUL’s overall volumes rose 1% in the reported period, excluding the consumer businesses acquired from GlaxoSmithKline Plc and VWash. The volume had contracted in the previous two quarters.
• Food & Refreshments segment accelerates: The Foods and Refreshment segment, (which contributes to about 30% of the revenues), grew by 19%. HUL said that ‘In-home consumption’ trend aided double-digit portfolio growth in this segment. Tea and Coffee sales continue to outperform.  Beauty & Personal Care segment sales stabilised in the quarter (0% growth). Home-Care segment registered a 1% decline in the quarter, as the products such as ‘Fabric Wash’ were impacted due to confined living, as consumers continue to work-from-home.
• Margins improve: HUL’s margins improved, as strong savings funnel, judicious and calibrated pricing in Tea, synergies in nutrition enabled the company to successfully manage headwinds of commodity inflation and adverse mix. HUL’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose 17% om-year to  ₹2,869 crore, and margin improved by 30 bps compared to September quarter 2019.
• Dividend: HUL has declared an interim dividend of ₹14 per share. The record date has been fixed as October 29th, Thursday. The dividend will be paid on or after 12th November, 20. 
• Management commentary: HUL said that rural markets have been resilient but the demand in urban India especially in metropolitan cities has been muted. The company believes that the worst is behind, and is cautiously optimistic on demand recovery, going forward.

The current quarter saw a steady set of numbers from the FMCG giant thanks to the boost given by the GSK merger. The Q2 results were largely in-line with estimates. The management commentary suggests that while operations are back to pre-Covid levels, consumption in the Indian economy is taking longer than expected to recover, despite resilience in the rural segment.

Ramping up capacities in the health and hygiene space whose demand is expected to remain elevated in the near future will aid growth in the near-term. Products like Lifebuoy delivered double-digit growth across formats. Discretionary products and out-of-home products such as ice-creams, vending businesses, might continue to face some pressure. HUL continues to have a diverse portfolio with market leadership in many segments, and a strong balance sheet.