Weakening rural demand hurt Hindustan Unilever Ltd (HUL) as the Indian unit of Anglo-Dutch consumer group Unilever Plc UNc.AS missed market expectations for quarterly profit on Friday.

Consumer price inflation in India has ticked up to a five-year high, making Indian consumers, several of whom make less than Rs 100 a day, cut back on discretionary spending.

HUL, Asia’s largest consumer goods maker by market capitalisation, is a barometer of Indian consumer sentiment because it sells products such as Lux soap, Lipton tea and Dove shampoos through thousands of mom-and-pop stores as well as big retailers across the country.

Profit after tax increased 12 percent at Rs 1,616 crore, falling short of market expectations. A CNBC-TV18 poll had predicted a profit of Rs 1,630 crore.

Sanjiv Mehta, chairman and managing director, HUL, said the quarter witnessed an overall challenging market environment, mainly reflecting a sharp slowdown in rural and discretionary spends. “In the short term, demand outlook and market growth continue to be challenging,” he said in a statement.

Mehta said HUL delivered a resilient performance in a tough environment. “The performance is reflective of the strength of HUL brands, consistency in strategy and execution prowess,” he said.

The company, along with its global parent, announced a major review of its tea division. The strategic review of the tea division is expected to finish by mid-year and “will consider all options” for the future of the business, Unilever said on Thursday.

HUL, whose overall market growth slowed down in the personal wash, or soap, category, will raise prices by up to 6 percent in the March quarter for these products.

Srinivas Phatak, executive director, finance and IT and chief financial officer of HUL, said the market context was challenging due to weak consumer sentiment. The crude and currency markets remained volatile and there were inflationary trends in palm and dairy, he said, adding that homecare and foods and refreshments performed well.

Shares of HUL ended at Rs 2,034.15, down Rs 24.30, or 1.18 percent, on the Bombay Stock Exchange.

First Published:Jan 31, 2020 4:49 PM IST