Retail

HUL reports 7% decline in volume owing to COVID-19

Updated : April 30, 2020 09:14 PM IST

HUL's factories are now operating at a 70-75 percent capacity.

HUL also said it is systematically reviewing all areas of cash generation and usage and re-evaluating all costs in the prevailing circumstances.

Last week, HUL's global parent Unilever withdrew its guidance for 2020 owing to the coronavirus outbreak world-over.

Consumer goods giant Hindustan Unilever Ltd (HUL) reported a seven percent decline in volume growth for the March quarter, the steepest since demonetisation. The street was expecting a 0-2 percent volume growth.

This decline in volumes comes on the back of the coronavirus outbreak in the country. Owing to the lockdown, stock levels for most of the FMCG companies came down at the retail or trade level.

"India's FMCG market was slowing down even before COVID-19 hit India. This market slowdown was further accelerated by the lockdown," said Srinivas Phatak, chief financial officer, HUL.

"Volatility in crude and currency also increased in the period," added Phatak, as he outlined the challenges faced by the company during the quarter.

Both rural and urban growth too decelerated during the quarter. In January, the management had indicated that the the near term outlook of the market was challenging and rural growth was still at 0.5x urban growth.

Historically for HUL, rural growth has always been 2x urban growth. During this exceptional period, the management said it was difficult to put a number in terms of market growth in the areas.

"If the monsoon lands, well it will augur well for the company. We are confident that the government will support the rural sector," said Sanjiv Mehta, chairman and managing director, HUL.

When the government first announced the nationwide lockdown, manufacturing activity had come to an absolute standstill for the first few days.

However, companies manufacturing essential goods have worked with local authorities over the last few weeks to scale up production and to manage the supply chain.

HUL's factories are now operating at a 70-75 percent capacity. The company has been able to scale up manufacturing in segments where there is high demand.

For instance, the company has scaled up manufacturing and capacity in the hand sanitiser space. "We are also into the process of launching many more products in the hygiene category in May and June," Mehta said.

"Segments like health, hygiene and nutrition are likely to be the categories of the future. Demand patterns are changing, and we are likely to see an upswing in categories like health, hygiene and nutrition. In the near term, we are also likely to see some adverse impact on discretionary categories and out of home channel," HUL said in a press release.

HUL also said it is systematically reviewing all areas of cash generation and usage and re-evaluating all costs in the prevailing circumstances. The company confirmed that there have been no job losses or pay cuts at present. However, the company may have to revaluate this depending on the situation in the future.

Last week, HUL's global parent Unilever withdrew its guidance for 2020 owing to the coronavirus outbreak world-over. "The unknown severity and duration of the pandemic, as well as the containment measures that maybe adopted in each country, mean that we cannot reliably assess the impact across our markets and our business," Unilever said in its financial press release.

HUL also completed the merger of GSK Consumer Healthcare with itself on April 1. Without giving any revenue guidance or financial implications of the deal, the management said the company is optimistic about the medium term potential of the GSK Consumer Healthcare portfolio.

HUL reports 7% decline in volume owing to COVID-19

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