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Unilever India highlights tea rebound and health foods innovation to battle inflation challenges

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HUL recently announced its Q2 FY2022 financial results and revealed healthy overall growth including net profits of INR 22.9bn (US$ 290mn), an 11% growth year-on-year; as well as an EBITDA margin of 23.2% – but a lot of the discussion was focused on the inflationary challenges the company is currently facing.

According to HUL CEO and Managing Director Sanjiv Mehta, various key commodities that HUL uses to make its products and packaging including barley, palm oil and polyethylene are all experiencing record-breaking inflation.

“Against 10-year median prices [crucial commodities such as barley and polyethylene have all inflated by more than 50% and the prices are at an historic high,”​ Mehta said during an investor and press event announcing HUL’s financial results.

“Palm oil [has] seen more than 100% inflation [and] has softened in the recent days from its peak [but is still not at normal levels], and even tea which saw extremely high inflation in 2021 and has [since] cooled off from this peak is still at relatively high levels [of inflation].

“Another source of inflation [in India] has been currency depreciation, with the dollar strengthening and USD-INR rates that were previously relatively stable around 74 to 75 now hovering around 80.”

HUL CFO and Executive Director for Finance and IT Ritesh Tiwari further stressed that this inflation has impacted production costs, hinting at potential further pricing actions to alleviate this pressure.

“Inflation has certainly further worsened in this quarter [and we are seeing] a 330 basis point year-on-year increase in our costs of goods sold,”​ said Tiwari.

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