Urban demand weakness persists as HUL, Nestle post tepid Q4

Bengaluru: Fast-moving consumer goods (FMCG) giants Hindustan Unilever Ltd (HUL) and Nestle India, on Thursday, reported weaker profit margins for the January-March quarter (Q4), showing that an urban demand slowdown is still biting the Indian economy.

A surge in the cost of living and slow wage raises in India have eroded urban consumers' purchasing power, forcing them to cut back on buying packaged goods and pressuring earnings of consumer goods makers already reeling from high input costs.

Hindustan Unilever reported a nearly 4% rise in its standalone net profit to Rs 2,493 crore, but fell short of Dalal Street estimates. Analysts were expecting net profit to be Rs 2,498 crore, according to data compiled by LSEG. The maker of brands like Dove, Lipton and Surf Excel expects an improvement in demand in the near term, supported by favorable macro.

"We have seen urban markets moderating and rural markets gradually recovering. We do believe that both should improve over the next three to six months. As rural demand remains resilient, we expect both engines of the consumption market to regain momentum," said Chief Executive Officer (CEO) and Managing Director Rohit Jawa in a post earnings briefing.

The company’s share price dropped 4% on Thursday as investors reacted to the earnings announcement.

HUL’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin came in at 23.1%, declining 30 basis points year-on-year. It projects its margins in the range of 22%- 23% in the near- to mid-term, Chief Financial Officer (CFO) Ritesh Tiwari said. This is below its previous forecast range of 23%- 24%.

The company’s underlying sales growth (USG) came in at 3% while the underlying volume growth (UVG) was 2%. It is expecting the first half of FY26 (April-September 2025) to be better than the second half of FY25 (October 2024-March 2025). It declared a final dividend of Rs 24 per equity share.

FILE PHOTO: A pedestrian walks past the Hindustan Unilever Limited (HUL) headquarters in Mumbai January 19 2015.

Input costs pinch Nestle

Meanwhile, Nestle India reported a 5.2% annual decline in its standalone net profit for Q4, at Rs 885 crore on the back of higher commodity costs. Its revenue from operations grew 4% to Rs 5,504 crore as compared to 9% growth reported in the same period last year.

The Maggi and Nescafe maker’s domestic sales for the quarter increased by 4.2%, respectively, crossing Rs 5,235 crore, the highest ever, surpassing that of January – March 2024 quarter, the company said in an exchange filing. 

While commodity prices continue to be firm for coffee, they’ve stabled for edible oils. Cocoa prices have corrected but continue to be high, the company added. The firm declared a dividend of Rs 10 per share.