Hindustan Unilever Ltd. posted a larger-than-expected quarterly profit, boosted by one-time gains that masked the pain from the continuing demand slowdown in the world’s most-populous nation.

The Indian unit of Unilever Plc had a net income of INR30 billion ($347 million) in the three months ended December 31, up 19% from a year ago, according to an exchange filing Wednesday. This exceeded the average analysts’ estimate of INR26.73 billion. 

Volume growth, a key metric for the firm which is regarded as a bellwether for local sentiment, was flat compared with a year ago. The company recorded a one-time gain of INR5.09 billion from the sale of its water purification business, its Chief Financial Officer Ritesh Tiwari said in a media call. 

Revenue, which missed estimates, rose 1.8% to INR152 billion during the period, with the bulk of the contribution coming from home care products. Total costs climbed 2% to INR122.5 billion.

The profit, which would have undershot analyst estimates if not for the one-time gains, is a sign of continuing weak demand in urban centers. Although rural demand has paced ahead for three quarters, the sluggish consumption in cities and towns — which makes up two-thirds of the total — has hurt the maker of Dove soap and Knorr soup.

Consumer “demand trends remained subdued with continued moderation in urban growth, while rural sustained its gradual recovery,” Chief Executive Officer Rohit Jawa said in a statement, adding that he was confident of the medium- to long-term opportunity in the sector.

Slow wage growth has been a drag on urban demand, by constraining middle-class spending. Average income growth over the past five quarters has been about 4%, according to Elara Capital.

This has led to a divergence in India’s spending where the rich are splurging on luxury apartments, jewelry and big cars, while the masses have cut back on purchases of staple items like biscuits and toothpaste.

Hindustan Unilever expects a “moderation in consumption trends” in the south Asian country in the “near term,” the Mumbai-based firm said in its post-earnings presentation. Small packs are growing faster than larger packs amid the slowdown in urban India, it added. 

The home care business grew 5.3%, while its food business grew 0.5%. Beauty grew 1.5% and personal care fell 3% compared with a year ago.

The consumer goods maker’s shares have gained 0.7% this year, after a 10.8% drop in 2024.

Beauty Acquisition

Unilever’s India unit announced its acquisition of niche beauty brand Minimalist, to tap into the fast-growing affluent market in India. 

It is buying 90.5% stake in Minimalist for INR26.7 billion in cash and will infuse another INR450 million. The acquisition is expected to close in the June quarter of financial year ending March 2026. 

The company is driving premiumization through its businesses, Jawa said in the statement.

Hindustan Unilever also approved the spin-off of its ice cream business, with one equity share of Kwality Walls (India) Ltd. to be alloted for one share of Hindustan Unilever. The firm expects the new entity to list on the Indian exchanges by March 2026, Tiwari said.