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Further price cuts loom

New Delhi, July 20 (PTI): Forecasting a nearly 5 per cent cut in gross margins for Hindustan Lever over the next three years, stock analyst Kotak Securities said in its latest report that it expects the company to cut prices in almost all product categories due to low-priced competition.

“We expect gross margins will decline to 32.5 per cent in 2005 versus 37.5 in 2002. Direct competition in some product categories suggests the required price cuts are significantly greater than what our expectation of gross margins suggests for HLL to effectively compete......We also believe ad expenses could fall as a proportion of sale,” the analyst said in its report.

Kotak cited Godrej Consumer Products’ soap, Godrej No 1, which it feels offers a better price-value equation.

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