Mumbai, Jan. 29: Consumer goods major Hindustan Lever Ltd (HLL) has reported a 6.96 per cent growth in net profit despite a flat topline.
In the fiscal ended December 31, 2002, the company earned Rs 9,954.85 crore in net sales and posted a net profit of Rs 1,755.68 crore.
The rise in profit was propelled by a double-digit growth in some of its ‘power brands’, HLL said. The company’s key brands — called ‘power brands’ in HLL’s parlance — like Lifebuoy, Lux, Liril and even skin care products like Fair & Lovely beat competitors in their respective segments.
The figures would not indicate the true performance, said HLL chairman M. S. Banga pointing out the pressures under which the company had to operate.
“All of that drop is due to the divestment of some of our businesses and phasing out traded exports,” he added.
The board has recommended a final dividend of Rs 3 for the year, taking its total dividend, including interim dividend of Rs 2.50, to Rs 5.50 compared with Rs 5 paid last year.
The results met market expectations yet the HLL share fell Rs 3.75 to Rs 172.80 on the Bombay Stock Exchange. Reacting to the fall in share prices, Banga said, “I would hope that our investors are here for the long term.”
Banga added: “The Lever power brands have grown robustly, beating its competitors significantly. We have been focussing on restructuring and improving the products in certain categories. We will continue to focus on ‘power brands’ and invest in innovation and we look forward to 2003 with cautious optimism.”
Commenting on other low-priced products that have made an impact in the FMCG segment especially in the salt, tea and detergents category, Banga emphatically said: “We know how to deal with every kind of competition. Low-cost competition is not new in India nor is it new to HLL.” Wheel detergent, HLL's answer to Nirma in the nineties , is now the largest selling brand and is very profitable in its category, he said. The company has been focusing on 30 ‘power brands’ which includes Lux soap, Pears, Vim, Wheel all of which have clocked double-digit growth figures.
For the fourth quarter ended December, the company’s net profit stood at Rs 466.51 crore (Rs 436.38 crore) while net sales were lower at Rs 2,634.50 crore (Rs 2,696.68 crore). The fourth quarter net profit includes Rs 76 crore, an exceptional item charge, on account of retirement benefits necessitated by falling interest rates and higher annuity cost of LIC. The company’s operating profit margin in the fourth quarter rose by 310 basis points from a year earlier.
“In 2002, we vigorously pursued our strategy of strengthening our brands to deliver sustainable quality growth in the face of intense competition, a sluggish economy and declining market,” the chairman said.
Sales of its home and personal care products segment, which houses most of its power brands and accounts for a large chunk of revenue, grew by 6 per cent during the quarter. The power brands in this segment grew 3.7 per cent. The gross margins of the foods business have increased by about 5 per cent, making the business increasingly ‘fit for growth’.