India's Hindustan Unilever slides as weak rural recovery drags volume growth

BENGALURU, Oct 20 (Reuters) - Shares of Indias consumer goods major Hindustan Unilever (HUL) (HLL.NS) fell on Friday as a weak rebound in rural demand pushed volume growth to a seven-quarter low.

The Indian unit of UKs Unilever (ULVR.L) on Thursday reported a 2% on-year increase in volumes during the September quarter. Analysts had estimated volume growth to be between 3% and 4%.

High inflation has hurt rural demand, with consumers tightening discretionary spending over the last year. Activity has also been hamstrung by uneven rainfall during the September quarter, analysts said.

The uneven distribution of Indias southwest monsoon showers has impacted agricultural income, hurting the weak rural demand recovery, according to Elara Securities.

Shares of HUL were down 2% at 12:10 p.m. IST, among the top losers on the blue-chip Nifty 50 index (.NSEI). The shares fell as much as 2.3% in early trade.

Rival consumer goods company ITC (ITC.NS) also declined 2.6% after missing second-quarter profit estimates. ITC and Hindustan Unilever dragged the Nifty FMCG index (.NIFTYFMCG) down 1.4%.

Revenue in HULs home care division, which accounts for about a third of HULs business, rose 3% year-on-year. The company said volume growth in the segment was in the mid-single digits.

“The disappointment came from the companys home care segment, because the price cuts were stronger, leading to slower revenue growth,” said Shirish Pardeshi, research analyst at Centrum Broking.

Easing raw material prices, however, contributed to HULs second-quarter profit beat and aided the core profit margin, which rose to 24.6% from 23.3% last year.

HULs shares have declined 2.4% so far this year. In contrast, the Nifty FMCG index has risen 17.4%.