PTI and Bloomberg
Mumbai: FMCG major Hindustan Lever today posted a net profit of Rs 392.89 crore for the quarter ended 31March, against Rs 442.86 crore for the same quarter last year. Profits have risen by 13.6% which is less than what they expected. They attribute it to higher advertising spend and cost of raw materials.
The total income of the company was Rs 3275.12 crore for the first quarter ended 31March, against Rs 2,867.41 crore for the corresponding quarter a year ago, Hindustan Lever informed the Bombay Stock Exchange.
The results for the quarter are not comparable to the corresponding quarter of 2006 because of the amalgamation of Modern Foods (India) Ltd and its subsidiary with itself, the company added.Shares fell after earnings missed analysts’ estimates for Rs3.5 bn.
The merger of Modern Food Industries (India) Ltd (MFIL) and Modern Food and Nutrition Industries Ltd (MFNIL) with itself was completed on March 30. Profit excluding gains from asset sales rose to Rs3.34 bn ($81 million) in the three months ended 31March from Rs2.94 bn a year earlier.
High costs and inflationary pressures
Hindustan Lever increased prices of its Surf Excel Blue detergent, Lux soap and Fair and Lovely cream in the quarter because of higher raw material costs, betting the fastest wage growth in Asia-Pacific will spur customers to pay more. Prices of palm oil, a key ingredient in soaps, rose 44% last fiscal year in Malaysia, the biggest producer of the commodity
“Inflationary pressures remain a cause for concern,” Harish Manwani, chairman, said in an e-mailed statement.
Shares of Hindustan Lever fell as much as 5% on Bombay Stock Exchange. The stock traded 4.5% lower at Rs200 at 12:57 pm local time.
Hindustan Lever, which sells its products through 6.3 mn shops in 638,000 villages and 5,545 towns, faces competition from local units of Procter and Gamble Co., which started selling its Ariel detergent in India in 1991 and Tide detergent and Pantene shampoo in 2000. Other rivals include Godrej Consumer Products Ltd.
Its London- and Rotterdam-based parent, Unilever, owns about 51.4% of the Indian company and first started selling its Sunlight soap bars in the country in 1888. It added Lifebuoy soap seven years later and expanded the portfolio with Lux soap and utensil cleaner Vim.
Hindustan Lever’s Manwani, 53, who took over in June 2005, has made changes in the management, sold some businesses such as tea factories, absorbed bread maker Modern Food Industries Ltd. and increased advertisement spending to compete with rivals such as Procter & Gamble.
After factoring in the asset sales, net income fell 11.3% to Rs3.93 bn last quarter from Rs4.43 bn. Sales rose 13.8% to Rs31.8 bn.