The Telegraph
Since 1st March, 1999
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Lever net dips, stock bubbles

Mumbai, April 16: Hindustan Lever Limited (HLL), the country’s largest consumer goods company, has suffered a 10 per cent drop in first-quarter net profit at Rs 382.92 crore against Rs 428.54 crore in the corresponding previous period.

The Indian subsidiary of the Anglo-Dutch major Unilever Plc said revenues rose marginally to Rs 2,367.50 crore from Rs 2,338.46 crore last year.

However, the results beat expectations, pushing up the share price on leading bourses today, the company said. The stock rose 4.40 per cent to close at Rs 147.75.

For the markets, the marginal growth in sales was remarkable in a year marked by a severe drought, a slackening economy and confusion on the implementation of value-added tax (VAT).

What was more heartening was the fact that the 30 power brands were growing faster than the industry average. “It was a mixed bag,” said Nihar Shah, senior investment analyst at Ask Raymond James, a premier investment brokerage house.

“Topline growth was decent. But there is pressure on margins (around half a percent decline), which is an area of concern,” Shah added.

Hindustan Lever registered an operating profit (profit before interest and taxation) of Rs 416 crore for the reporting quarter, an increase of 9.1 per cent over the corresponding previous period.

Sales of home and personal care products recorded a strong growth of 5.6 per cent.

The company’s total sales grew 1.2 per cent with sales of continuing businesses growing 2.9 per cent. This was achieved despite business operations being adversely affected by the uncertainty associated with VAT towards the end of March.

Chairman M. S. Banga said, “In the home and personal care segment, we have used aggressive pricing and higher media spends to stimulate volume growth.”

Drawing attention to the exceptional growth in select segments, Banga said, “It is very encouraging to see overall volumes rising 11 per cent led by a 41 per cent growth in hair care products, 27 per cent in skin care, 16 per cent in oral care and 5 per cent in laundry.”

“This has taken up overall sales growth to 8 per cent for our power brands, making it the fourth consecutive quarter of growth in these depressed markets,” he said.

Banga said the impact on the bottomline (profits) could be attributed to the company’s new strategy.

“This strategy may well have an impact on operating profit in the very short-term. However, we remain confident of our ability to deliver sustained profitable growth by driving our power brands with innovation, appropriate pricing and brand investment.”

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