Hindustan Unilever (HUL) on Thursday reported an increase of 17% year-on-year in net profits at Rs 2,243 crore in the December 2021 quarter. Revenue from operations grew 10.4% y-o-y to Rs 12,900 crore. Volumes, however, grew at 2%, halving over Q3FY21.

The FMCG major made market share gains in rural and urban markets across categories and price segments.

Sanjiv Mehta, CMD, HUL, said 30% of the company’s business comes from price-sensitive packs and that had impacted volumes. “A large part of India is price-sensitive and consumes lower-priced packs. So, as we adjust pricing, we try to hold on to the price and tighten the volume, which impacts the overall volumes,” he said.

The home care segment sustained its strong double-digit growth momentum, growing at 23% during the quarter, led by double digit growth in fabric wash and high teens in household care. Beauty and personal care grew 7% led by strong growth in skin cleansing, skincare and colour cosmetics. The haircare market share was a 15-year high while food and refreshment delivered a steady performance at 3% on the back of high teens growth in the base. Health, hygiene and nutrition continued to perform well and delivered 10% 2-year CAGR. Discretionary and out-of-home portfolios have recovered strongly and are above pre-pandemic levels.

Calling out the current inflationary pressures as “unprecedented”, Mehta said, “Inflation is at a multi-year high. So, though the headline growth is very much there in rural India, the volume has become negative. Rural consumption has weakened and will increase only with more money in the hands of rural population.”

However, he said the company’s growth from value perspective is 2x the market, even as volumes are impacted because rural demand is negative. “From that perspective we are pleased that we have remained competitive, grown our market share and protected our business model,” Mehta said.

According to Ritesh Tiwari, chief financial officer, HUL, the multi-year high inflation impacts two-thirds of the company’s portfolio. “Our material cost per tonne has inflated by more than 30% vis-a-vis financial year 2020,” he said. The major impact was felt in palm oil, crude oil derivatives and tea prices.

He sounded caution on the near term inflationary pressures and expects to see more inflation in March on a sequential basis compared with the December quarter. However, Mehta said inflation could start to moderate in the second half of the calendar year 2022.

HUL reported an Ebitda (earnings before interest, tax, depreciation and amortisation) of `3,277 crore, an increase of nearly 15% y-o-y, while maintaining healthy margins of 25.4%, up 100 basis points y-o-y due to financial management and hard savings across all lines of profit and loss account.

“We will continue to manage our business with agility, take all steps required to protect our business model, grow our consumer franchise whilst maintaining our margins in a healthy range. We remain confident and are focussed to deliver our growth agenda,” Tiwari said.

He further said the operating environment remains challenging as FMCG markets growth are moderating and consumers are tightening volumes owing to significant inflation. “We have cautioned our rural markets growth in the last quarter results. We do see that softening this quarter. Commodity headwinds continue to be a significant challenge for the industry. While rising cases in third wave are a concern, we expect limited impact,” he said.