Hindustan Unilever (HUL) reported a nearly 5% decline in profit before tax and exceptional items for the second quarter, mainly due to a slowdown in sales volumes ahead of the implementation of the government’s goods and services tax cuts. The company’s profit before tax and exceptional items dropped to 33.89 billion rupees ($385.57 million) from 35.64 billion rupees a year earlier.
Despite the profit dip, Hindustan Unilever’s overall revenue increased by 2% year-on-year to 160.34 billion rupees, supported by price hikes across its product portfolio and strong demand in the beauty division. The skincare and cosmetics segment saw a 5% rise in sales, aided mostly by premium products. Following the earnings report, HUL shares initially rose by as much as 3% but later pared gains, trading around 1% higher.
The company noted that overall volume growth remained flat due to temporary disruptions caused by the GST cuts announced in August. Distributors and retailers focused on clearing existing inventories, delaying new orders ahead of the tax changes taking effect on September 22. HUL stated that the sales disruption had a minimal impact on its skincare and cosmetics businesses, which grew at a high single-digit rate during the period. Its EBITDA margin declined by 90 basis points during the quarter, but the company anticipates that disruptions from the tax cuts will improve from November onwards.
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Notably, HUL’s profit after tax increased by 3.6%, boosted by a one-time gain of 1.84 billion rupees. Meanwhile, its parent company, Unilever, exceeded sales forecasts driven by strong demand for beauty products in North America and emerging markets.
