India’s largest consumer products company, Hindustan Unilever Ltd (HUL), the Indian subsidiary of UK-based Unilever Plc. saw its net profit fall by 3% in the first quarter ended 31 March, compared withthe year-ago period.
The year-earlier quarter, however, had the advantage of a one-time gain of Rs65.81 crore from tax credits and the transfer of two factories.
Volumes game: HUL vice-chairman D. Sundaram. Net sales of the company rose 19% to Rs3,793.94 crore.
Excluding this gain, HUL’s net profit in the latest quarter rose 16.5% to Rs380.9 crore on the back of increased prices for its products.
Net sales of the company, which owns brands such as Close-up toothpaste, Lifebuoy soap and Taj Mahal tea, rose 19% to Rs3,793.94 crore.
“The underlying volume growth was about 10.2%, while price increases contributed to the rest of our sales growth,” said the company’s vice-chairman D. Sundaram.
Analysts tracking HUL said the results were in line with expectations. “There was a good growth in top line indicating a strong demand for their products. The profit growth was lower than the sales and margins were under pressure due to severe input costs,” said Unmesh Sharma, an analyst at Mumbai-based brokerage Macquire Securities.
“Besides, the increase in the prices of input products such as crude oil, media inflation added to the pressure.”
The company said the prices of raw material, such as crude and vegetables oil, continued to rise and to protect its margins, it might increase prices as and when necessary.
Soaps and detergents’ sales, which accounted for over 45% of the company’s turnover in the March quarter, grew by 19.2% to Rs1,738.2 crore. “The margins of this segment grew by about 130 basis points. This was largely because of lower advertising spends on soaps and detergents,” Sundaram said. One basis point is 0.01%.
During the quarter, the company lowered the prices of its soap brands Lux, Hamam and Rexona for select units. The price of the 100gm pack of Lux was reduced to Rs16 from Rs17, while the price of the 45gm cake was lowered to Rs5 from Rs6.
HUL’s personal products segment, the highest contributor to the company’s profit, grew 23.5% to Rs1,018.8 crore, and its processed food business grew at 15.5%.
The company’s beverages business posted a 15.8% increase in sales at Rs430.9 crore, but profits in the segment fell by 9.5% due to higher advertising and promotional spending.
HUL, India’s largest advertiser, raised its advertising spend by 21% to Rs432.53 crore in the quarter ended March. The company’s shares closed at Rs247, down 1.02%, on the Bombay Stock Exchange on a day when the benchmark Sensex index fell 0.64%.