MUMBAI: Hindustan Lever Ltd (HLL), India’s biggest consumer goods maker, on 20 February posted a 1.9 % fall in quarterly profit as higher costs of raw materials and advertising outweighed strong sales.
The unit of Anglo-Dutch Unilever has struggled with higher vegetable oil prices, lower sales of premium skin-care products because of a milder winter, and higher advertising costs from new product launches.
It has raised prices of some products, including soaps and detergents, which make up 45 % of overall sales.
HLL said net profit fell to Rs511 crore ($116 million) in the fourth quarter to 31 December from Rs521 crore a year earlier. It said net sales rose to Rs31.56 billion from Rs29.74 billion a year earlier.
The result compared with a Reuters poll forecast for net profit of Rs500 crore on net sales of Rs33,400 croreon.
“Growth could have been higher, but the skin-care range was affected by a short and slow onset of winter,” Finance Director D. Sundaram said.
HLL’s advertising costs rose 7%, while cost of raw materials climbed 10.5% in the quarter from a year earlier.
“We recognise the challenge of cost escalation, and in the competitive context, achieving cost leadership continues to be a key priority,” Chairman Harish Manwani said.
Parent Unilever reported disappointing quarterly earnings earlier this month, and gave a lacklustre outlook for 2007.
HLL’s full-year net profit rose 32% to Rs18.55 billion.
Shares in HLL, which make up 2.5% of the key Bombay Stock Exchange index, fell 0.7 % to Rs.203.75 in a flat market.
HLL shares fell 15.5 % in October-December, sharper than a 6.4 % fall for the sector index and trailing a 10.7 % gain for the main index.
HLL, valued at $10.3 billion, has been divesting non-core assets in recent years to focus on its portfolio of big brands, which include Lux soap, Sunsilk shampoo, Surf detergent and Lipton tea.
HLL is expected to benefit from a mix favouring higher-margin products and a rollout of the value-added tax in southern Tamil Nadu state, a key market.
It competes with Procter & Gamble, Colgate Palmolive and homegrown Dabur India, Godrej Consumer Products, Nirma and ITC Ltd., which recently entered personal care and retail.