HUL's Q2 to be Near Flat Due to Transitory Impact of GST

Leading FMCG major HUL on Friday said that while reduced GST rates will support long-term consumption, short-term order postponement due to anticipation of lower tax led to "near flat to low-single digit" business growth in the September quarter.

HUL, which owns popular brands like Lux, Rin, Surf Excel, and Ponds, has witnessed a transitory impact "in the form of disruption at distributors and retailers" across channels to clear existing inventories at old prices.

"This has resulted in postponement of ordering in anticipation of receiving new stocks with updated prices and lower orders across the overall portfolio as consumers delayed their pantry buying," said HUL in a regulatory filing.

This disruption resulted in a short-term impact on sales for the company in the September quarter.

"Given our existing pipeline inventory in the channels, we expect this impact to continue into October as well," he said.

Though these reforms are expected to increase disposable income and drive long-term demand across key categories, such as toilet soap, toothpaste, shampoo, hair oil, talcum powder, lifestyle nutrition and other food items, the postponement of purchase in the quarter impacted sales.

"Due to the aforesaid context, we expect the consolidated business growth to be near flat to low single digit for the quarter ending September 30, 2025, based on current view," the company said.

According to HUL, this is a one-off, transitory impact, and anticipating recovery starting in November as prices stabilise, underpinned by rising disposable incomes and ongoing portfolio transformation actions.

Terming GST reforms as a "positive step" by the government to drive consumption, HUL said the revised GST rates will benefit approximately 40% of its portfolio.

Under GST reforms, the government has put daily essentials, including food items, into a lower tax bracket of 5%, applicable from September 22.

"HUL remains committed to supporting the government's efforts by ensuring that the GST benefits are being passed on to consumers through competitive pricing and enhanced value across a wide range of products from 22nd September onwards. These reforms are expected to increase disposable income and drive long-term demand across key categories," the company said.

HUL is part of Unilever PLC, a British multinational consumer packaged goods company. It is the second-largest market for Unilever after the US.