Hindustan Unilever Ltd’s (HUL) multi-quarter-high revenue growth for the three-months ended September (Q2FY27) failed to bring much excitement to investors, probably due in large part to margins dropping to multi-quarter lows.
Elevated commodity prices triggered by the West Asia war dragged HUL’s consolidated gross margin down a huge 397 basis points (bps) year-on-year and 195 bps sequentially to 47.6%. The fast-moving consumer goods (FMCG) giant’s total raw-material costs increased by 24% year-on-year, far above the operating revenue growth of 14.8%, which was highest in 14 quarters.
To protect profitability, HUL undertook calibrated pricing actions which, along with operating leverage and a 9% fall in advertising and promotion expenses, helped curb the Ebitda margin drop to 134 bps year-on-year to 22.4%. Ebitda grew by 8% to ₹4,090 crore. The company sees commodity inflation continuing in the short term and has guided for consolidated Ebitda margin of 22-24% in the medium term. HUL expects FY27 demand outlook to be better than FY26, driven by portfolio and channel transformation.
In Q2FY27, pricing growth was around 8% and underlying volume growth was 7%, on…