Mumbai: India’s top consumer goods maker, Hindustan Unilever Ltd, reported a better-than-expected 24% rise in quarterly profit on Wednesday, helped by price increases and strong sales of premium products.
Rising incomes in India are expected to boost demand for Unilever’s products, including Lux soap, Surf detergent and Lipton tea, but rising raw material costs are a major concern.
“We would continue to drive growth on the back of our strong brands and are expecting market growth to continue, as we do not see any change in consumer spending patterns,” Finance Director D. Sundaram told reporters.
The company expected personal care products and processed foods to drive growth in coming quarters, he said.
The unit of Anglo-Dutch Unilever Plc said net profit rose to Rs6.31 billion ($159 million) in its fourth quarter ended 31 December from 5.11 billion a year earlier.
Net sales rose to Rs36.87 billion from 31.56 billion.
That beat a forecast of a net profit of Rs5.59 billion on net sales of 36.1 billion in a Reuters poll.
Its full-year net profit rose 3.8% to Rs19.25 billion.
Unilever, like other consumer goods firms, has been trimming costs and raising prices of products to offset higher costs of raw materials like vegetable oil and packaging. It has also spun off smaller businesses to focus on its core portfolio.
“As of now, it looks like there is no let up on the petroleum prices front and vegetable oil prices have also been very strong,” Sundaram said.
“We propose to manage all this by a combination of managing our costs front well, continuing to look internally for cost savings and of course, time and again look at pricing,” he said.
Parent Unilever, which owns 52.1% in the Indian unit after completing a buyback of 30 million shares in January, last week posted its strongest annual growth for five years.
In India, Unilever is facing a harder fight from local rivals such as Godrej Consumer Products, Marico, Dabur and ITC as well as from the local units of Procter & Gamble and Colgate-Palmolive.
ITC, the top cigarette maker, is extending its line of packaged foods, soaps and shampoos, and is also expected to launch detergents. Last month, it reported a forecast-beating 16% rise in quarterly profit to Rs8.31 billion.
Meanwhile, Unilever’s new businesses including a water purification system and a rural distribution network have been slow to yield returns.
Shares in Unilever trade at 26.9 times forecast earnings, compared with 26.4 times for ITC.
Unilever, which has a market value of about $11 billion, fell 2.5% in the December quarter, lagging a 7.3% gain for the sector index and a 17% increase for the main share index .