HUL to further raise prices. Here’s how much

Hindustan Unilever, the largest fast-moving consumer goods (FMCG) maker in the country, is considering further price hikes this quarter as raw material costs continue to bite. The maker of Lux soap and Red Label tea had already raised prices by around 5% in April-June to offset some of the cost increases.   “The situation continues to remain volatile, whether it is the Middle East crisis, which is continuing, or we are also watchful of the El Niño impact on the monsoon. Between the September quarter versus the June quarter, we see sequential inflation, which could range between 2-5%. So, we will continue to take calibrated pricing into the quarter depending on how inflation pans out,” Priya Nair, the MD and CEO of HUL, said.   Hindustan Unilever reported a 10% year-on-year growth in standalone sales at Rs 16,514 crore in the April-June quarter, compared with Rs 15,003 crore a year ago. Underlying volumes grew 5%.   However, standalone net profit saw a 4% decline in the first quarter, at Rs 2,631 crore, compared with Rs 2,732 crore a year ago, pulling the shares down 7% to Rs 2,023.15 on the BSE.   HUL’s total expenses in the quarter rose 10% to Rs 13,267 crore, from Rs 12,088 crore. Earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 8% to Rs 3,768 crore, from Rs 3,480 crore.        Crude oil prices have been volatile over the last several months amid the US war on Iran that disrupted oil and gas supplies. Crude oil-linked derivatives form a key raw material in FMCG products from soaps and shampoos, household cleaning products to plastic bottles and pouches.   Niranjan Gupta, the CFO of HUL, said that the company had only managed to pass on half of the price increases in the April-June quarter and therefore measured steps on pricing would continue.   Despite the price hikes, Nair stressed the company remained “obsessed” with volume-led revenue growth, and that would continue to remain a priority. The company has stepped up its advertising and promotional spends to drive sales. Last quarter, A&P spends were at Rs 1,507 crore, up from Rs 1,498 crore a year ago. According to Gupta, A&P spends last quarter were at the highest level in 11 quarters.   So far, demand in urban as well as rural markets has been stable, according to HUL officials, who remain watchful of the evolving situation in West Asia as well as how the monsoon rain pans out back home.   Nair stated that agriculture accounts for only 15% of India’s GDP and the overall monsoon impact on it could be 50-60 bps. However, the timing and extent of the monsoon, and its geographical spread, are some things to watch out for, she said.   Analysts at Axis Securities had noted earlier that while demand momentum remained encouraging during the quarter for FMCG companies, the operating environment continued to be shaped by elevated crude-linked input costs, particularly during the early part of the first quarter, before easing towards the quarter-end.   Most FMCG companies responded through calibrated pricing actions, grammage adjustments, cost optimisation initiatives, and supply chain efficiencies to mitigate the impact, they pointed out.   Last week, Nestle India had reported a 48% surge in quarterly net profit at Rs 975 crore, while sales grew 25% from a year ago to Rs 6,363 crore. Tata Consumer Products, on the other hand, had reported a 29% rise in group quarterly net profit at Rs 427 crore, while revenue gained 12% to Rs 5,349 crore.