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Profit jumps for Indian consumer goods giant despite lockdown as people stocked essentials

Prospects for Hindustan Unilever will now depend on how quickly the Indian economy rebounds after the government started easing the lockdown.

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Mumbai: The Indian unit of Unilever NV 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 Ltd., the Anglo-Dutch company’s listed local subsidiary, reported a 6.8% rise in net income to 18.8 billion rupees ($252 million) for the latest quarter, beating an average analysts estimate of 17.2 billion rupees. Revenue rose 4.3% 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% decline for the quarter compared to the previous year, to a 4% 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.

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

‘Difficult to estimate’

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 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 U.S 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 $500 million a year, and feature women of all skin tones in future advertising campaigns.-Bloomberg

Also read: Inflation could surge to 12% if RBI starts printing money to fund govt, Rabobank says


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