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Hindustan Unilever, India’s largest consumer goods company, on Friday said it expects near-flat to low single-digit growth in the September quarter due to temporary disruptions across its distribution network caused by the goods and service tax (GST) rate cuts.The maker of Dove shampoo and Lux soap said the lowered taxes support long-term consumption though it has faced a transitory impact in the form of disruptions at distributors and retailers for clearing existing inventories with pre-GST 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. This has led to a short-term impact on sales for the company in September,” HUL said in a stock exchange filing. “Given our existing pipeline inventory in the channels, we expect this impact to continue into October as well.” The revamped GST regime rolled out from September 22 lowered taxes on daily essentials including soaps, shampoos, toothpaste, and food items from 12% or 18% to 5%. HUL said the revised rates covered about 40% of its portfolio, and it has passed on the price cuts to consumers through competitive pricing and enhanced value. While consumer companies expect retailers and distributors to replenish inventories, they do not anticipate an immediate spike in consumer demand as these price cuts are not time-bound and will not trigger any pantry loading.Live EventsNotably, the trade pipeline for many companies had virtually dried up as trade partners did not want to block their working capital by ordering and getting credit for the price difference later.”These reforms are expected to increase disposable income and drive long-term demand across key categories. This is a one-off, transitory impact, and we anticipate recovery starting November as prices stabilise, underpinned by rising disposable incomes and our ongoing portfolio transformation actions,” HUL said.The company’s performance is considered a proxy for broader consumer sentiment in India. Its value sales growth has been swinging between near-flat and 4% for nearly two years.HUL posted a 5% rise in sales during the June quarter but said while demand was recovering gradually, it did not expect the scenario to change overnight.Add as a Reliable and Trusted News Source Add Now!
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