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Company Report

HINDUSTAN LEVER

Hindustan Lever has been battling sluggishness for three years now. It is not yet over. It ended the year with a 9 per cent decline in total income at Rs 10,339.39 crore (Rs 11,353.69 crore) against which the total spending was brought down by 12 per cent enabling it to report an 11 per cent improvement in the net profit.

At Rs 9,954.85 crore (Rs 11,054.08 crore) net sales were down 10 per cent over the year-ago period. HLL has been under pressure throughout the year with sales continuously declining on a year-on-year basis. Sequentially too the performance has not been very encouraging.

Home and personal care segments of the FMCG sector have been the only two positive segments. Sales of foods, beverages and ice creams were down while exports too suffered a decline. Revenue shortfall has been compensated by effective cost control during the year. Operational costs at Rs 7,998.99 crore (Rs 9,257.92 crore) were 14 per cent down from the same period last year.

Advantages of cost reduction have negated the impact of lower revenues for the year resulting in an improvement of margins in HLLís case.

Operating profit was up 9 per cent over the year-ago period at Rs 1,955.86 crore (Rs 1,796.16 crore). OPM at 20 per cent was 4 percentage points higher than the 16 per cent it reported during last year.

Other income went up 28 per cent from last year to Rs 384.54 crore (Rs 299.61 crore), while interest cost at Rs 9.18 crore (Rs 7.74 crore) went up 19 per cent. Depreciation was down 7 per cent from the previous corresponding period to Rs 134.10 crore (Rs 144.66 crore).

Despite the tax cost having gone up by 19 per cent over the previous corresponding period to Rs 479.85 crore (Rs 402.42 crore), net profits (excluding extraordinary items) surged 11 per cent over the same period last year to Rs 1,717.27 crore (Rs 1,540.95 crore).

It reported an extraordinary income of Rs 38.42 crore against Rs 100.36 crore during last year. HLLís performance is very much dependent on the home and personal care segment.

Its other ventures are neither growing nor are contributing anything substantial to the profitability. HLL now trades at Rs 163 discounting its full year EPS of Rs 7.80 by 22 times. With a growth of just about 11 per cent in profits and that to on the back of cost reduction and falling sales it is fully priced.

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