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Unilever India: Price Cuts Expected, Volume Growth Focus

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By Rediff Money Desk, NEWDELHI   Feb 08, 2024 20:09

Unilever is focusing on driving volume growth in India's FMCG market and expects price reductions. The company's sales were flat in the fourth quarter due to negative pricing.
Unilever India: Price Cuts Expected, Volume Growth Focus
New Delhi, Feb 8 (PTI) Multinational FMCG firm Unilever is focusing on driving competitive volume growth in the Indian market and expects a price reduction in its products "if current commodity prices persist".

In the December quarter, its India business HUL grew to mid-single digit led by volume, with lower input costs that led to negative pricing in the fourth quarter, Unilever said in its earnings statement on Thursday.

"We are focused on driving competitive volume growth while pricing is expected to remain marginally negative if current commodity prices persist," it said.

In the Indian market, Unilever's sales were flat in the fourth quarter as pricing turned negative, mainly driven by price reductions in fabric cleaning and skin cleansing bars as a result of commodity movements.

This also impacted Unilever's overall fabric cleaning segment, which was negative in the December quarter, as the "pricing reflects commodity deflation, particularly in India," it added.

Moreover, the company also had a tax refund of 0.4 billion euros from India in 2023.

The company follows the January-December financial year.

In terms of volume, India is the biggest market for the Anglo-Dutch FMCG major firm.

For 2023, it reported a turnover of 59.6 billion euros. The company's underlying sales growth in the full year stood at 7 per cent with a volume increase of 0.2 per cent and 6.8 per cent from price point.

While for the December quarter, Unilever's turnover was at 14.2 billion euros, up 4.7 per cent.

Its Asia Pacific Africa Zone, which consists of large markets such as India and China, contributed 44 per cent of the group turnover in 2023. It posted an underlying sales growth of 6.5 per cent with price growth of 5.3 per cent and volume growth of 1.1 per cent.

China grew low single-digit in a deflationary market with low consumer confidence.

In Indonesia, sales declined to double-digit in the fourth quarter as consumers avoided the brands of multinational companies in response to the geopolitical situation in the Middle East.

Unilever CEO Hein Schumacher said: "Today's results show an improving financial performance, with the return to volume growth and margins rebuilding. However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever's full potential."

On the outlook, Unilever said it expects underlying sales growth (USG) for 2024 to be within our multi-year range of 3-5 per cent with more balance between volume and price.

"We anticipate a modest improvement in underlying operating margin for the full year. We will deliver this through gross margin expansion, driven by a step-up in productivity and net material inflation back to more normal levels," it said.

Last month, HUL reported a marginal increase of 1.08 per cent in its consolidated net profit at Rs 2,508 crore for the December quarter.

Its revenue from sales of products was marginally lower at Rs 15,259 crore during the quarter. It stood at Rs 15,314 crore in the year-ago period.
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