The Telegraph
Since 1st March, 1999
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Lever stuns with profit rise

Mumbai, July 31: Hindustan Lever (HLL) today announced a 12.6 per cent leap in second-quarter net profit at Rs 450.93 crore, forcing legions of conservative analysts predicting nasty numbers to eat crow.

The spike in sales and profit killed fears that the strategy to fight its price-warrior rivals by offering power brands like Surf Excel, Pepsodent, Sunsilk at cheaper rates would bite into the bottomline. A chunk of the profits had its roots in the Rs 57-crore reduction in overheads like advertising and promotions in April-June.

Foreboding reports dished out by FMCG experts had painted a gloomy quarter in which the confusion over value-added taxes (VAT) and the truckers’ strike would throw a wrench into Lever’s sales machine.

The stock greeted the numbers with a gain of Rs 2.15 in the closing price of Rs 170.15 on BSE, up from Rs 168.

The Lever board has declared a 250 per cent dividend on shares with a face value of Re 1; effectively, this means a pay-out of Rs 2.50 each.

Chairman M. S. Banga said the second-quarter volumes were hit mainly by the transport strike, which crimped sales in personal wash and ice-cream businesses.

Operating profit at Rs 506.23 crore went up 8.9 per cent over the corresponding quarter of 2002. Sales grew 3 per cent. Sales of soaps and detergents were 3.5 per cent higher — in a market that shrank by 4.5 per cent.

“After a period of restructuring, the company has regained growth momentum, led by its power brands. Our personal care products under the power brands achieved a strong growth for the fifth consecutive quarter at 4.6 per cent in depressed conditions,” Banga added.

Banga promised to continue waging the war on companies that have been under-cutting prices to wrest market share.

Soaps and detergent sales grew 8 per cent, buoyed by Lifebuoy (up 31 per cent), Lux (up 10 per cent) and Vim grew 7 per cent. In personal products, skin-care brands notched up a growth of 14 per cent. Toothpaste sales declined 3 per cent in a market that fell 11 per cent.

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