Business Recorder
Hindustan Unilever Ltd said on Thursday it is relying on cost cuts and price increases to counter commodity volatility stemming from the Middle East war, after reporting an 18% jump in quarterly profit. Rising raw material costs, driven by a war-led spike in crude prices, are expected to squeeze margins for consumer goods makers, with India particularly vulnerable as the world’s third-largest oil consumer depends heavily on Middle East energy imports. Material cost inflation is roughly at 8% to 10%, while price hikes that Hindustan Unilever has implemented so far are between 2% and 5%, finance chief Niranjan Gupta said on an earnings call. The company is reducing pack sizes for certain products and raising prices for some others, while stepping up cost cuts, including in advertising, to offset what it called “short-term impacts from Middle East situation.” “Hindustan Unilever and peers face a margin squeeze: input costs are rising quickly, but consumer resistance, competition, and the need to protect volumes prevent full and immediate pass-through,” consumer goods consultant Akshay D’Souza said. Unilever’s India arm to invest up to $221 million in high-growth categories Shares fell 4% post-results, making the stock the third-biggest loser on the benchmark Nifty 50 in a broadly weaker market. The pressures reflect a broader industry trend, with peers such as bottled water maker Bisleri and Fortune cooking oil maker AWL Agri Business also leaning on price hikes to shield margins. The Dove soap maker, however, maintained its mid-term forecast for core earnings margin at 22.5%-23.5%. Also on Thursday, parent Unilever said it would raise prices as the Iran war drives up costs, even as it reported quarterly underlying sales growth ahead of analysts’ forecasts. For the March quarter, Hindustan Unilever’s profit rose to 29.30 billion rupees ($307.57 million), helped by consumption tax cuts, while revenue climbed 7% to 155.99 billion rupees. Margins on earnings before interest, tax, depreciation, and amortisation (EBITDA) improved 10 basis points year-on-year to 23.9%. Hindustan Unilever expects its fiscal 2027 performance to be better, as it sharpens its focus on premium products and doubles down on “fewer, bigger bets” including its Horlicks protein drink, it said.
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