Unilever's India unit beats estimates as consumers stockpile

[MUMBAI] The Indian unit of Unilever posted a better-than-expected profit for the quarter ended June 30, boosted by a newly merged unit and stockpiling of household essentials during the world's biggest lockdown.

Hindustan Unilever, the Anglo-Dutch company's listed local subsidiary, reported a 6.8 per cent rise in net income to 18.8 billion rupees (S$349.5 million) for the latest quarter, beating an average analysts estimate of 17.2 billion rupees. Revenue rose 4.3 per cent to 104.1 billion rupees, according to an exchange filing Tuesday.

"Consumers are being more circumspect with their money," said Srinivas Phatak, Hindustan Unilever's chief financial officer in a post-earnings conference call. "Rural markets have been more resilient than urban ones."

Prospects for Asia's biggest consumer goods producer by market value will now depend on how quickly the Indian economy rebounds after the government started easing the lockdown to rescue an economy headed for the first annual contraction in over 40 years. The maker of Dove soap, Lipton tea and Surf detergent also benefited because of the integration of GlaxoSmithKline Plc's local consumer business.

GSK's consumer business, bought in 2018, was merged into Hindustan Unilever from April 1. The addition of this new business boosted the company's turnover from a 7 per cent decline for the quarter compared to the previous year, to a 4 per cent increase.

Unilever's India unit is also expected to see robust demand for its health and hygiene products with India becoming the third worst-hit nation in this pandemic. The company said in April that it was going to launch several new products in this segment, given the focus on sanitation to fend off the novel coronavirus.

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Hindustan Unilever's shares have climbed nearly 21 per cent this year compared to an 8.1 per cent fall in the benchmark S&P BSE Sensex.

The hobbling Indian economy and the rising unemployment now risk squeezing consumer spends.

"The near term is going to be a very difficult to estimate, either on market growth or consumer demand," said Mr Phatak. "There's a bit of uncertainty coming from the virus disruption. There's also a bit of uncertainty due to the overall economic activity being subdued."

Hindustan Unilever announced plans to rename its controversial skin-brightening cream 'Fair & Lovely' to 'Glow & Lovely' this month, as the company came under pressure amid Black Lives Matter protests in the US over branding that deepens racial stereotypes and prejudices.

It also removed the terms "fair," "whitening" and "lightening" from Fair & Lovely's packaging and marketing material of the product, which brings in about US$500 million a year, and feature women of all skin tones in future advertising campaigns.

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