New Delhi: Hindustan Unilever Ltd (HUL) was for long considered the jewel in parent Unilever Plc’s portfolio, but it now emerges that the Anglo-Dutch multinational isn’t really happy with the performance of its Indian subsidiary.
On Thursday, Paul Polman, chief executive officer of Unilever, referred to the Indian firm as an underperformer.
“Although improving, we still have some country/category positions that need to do better. Our competitive positions in India, Spain and Eastern Europe have not yet improved to the extent I would expect,” Polman said while announcing the company’s results for the fourth quarter and for all of 2009.
For the year ended December, the Asia-Africa region saw a 7.7% underlying sales growth and volume growth of 4.1%.
Volatility challenge: Paul Polman says action has been taken across the portfolio to strengthen HUL’s market presence in the country. Abhijit Bhatlekar/Mint
“In a very challenging and volatile environment, the region posted another strong growth and margin improvement. Volume growth accelerated quarter-on-quarter and market shares progressed in most parts of the region with the exception of India, where actions have been taken across the portfolio to strengthen (the) market,” the company said on its website.
HUL last week posted third quarter earnings that signalled a recovery in demand.
However, the company’s profits were eroded by heavier spending on advertising and promotions as well as price reductions.
Taking out exceptional items and the market value of forex transactions, net profit grew by just 0.1% in the three months ended December to Rs609.18 crore while net sales rose 4.5% to Rs4,504.26 crore.
According to an analyst, HUL is doing everything possible to drive sales and profitability.
“They are taking various measures such as spending a lot on advertsing, improving the product mix and taking price reductions, but it has to be seen how all this benefits the company,” said the Mumbai-based analyst who did not wish to be identified.
This person added that some of these measures “should have been taken a long time back”.
“From the parent company’s point of view, Unilever has expectations from the emerging markets, but India’s performance may not be satisfactory by those standards,” he said.
A spokesperson for HUL said the company would not comment on the speech or the information on Unilever’s website.
In 2009, Unilever’s net was down 31% to 3.66 billion Euros (around Rs23,400 crore today) on sales of 39.82 billion Euros (around Rs2.5 trillion today), down 1.7%.