Mumbai: Marginal price increases along with tax incentives helped Hindustan Unilever Ltd (HUL) exceed expectations on Monday with a 32% jump in net profit for the quarter ended 30 September.
India’s largest home and personal care products maker posted a profit of Rs 566.12 crore, beating the Rs 522 crore average of 28 analyst estimates compiled by Bloomberg.
Net sales rose 10.7% to Rs 4,680.87 crore.
“Our domestic consumer business has delivered double-digit underlying volume growth for the third quarter in a row,” HUL chairman Harish Manwani said in a statement.
Over the past year, the Indian subsidiary of Unilever Plc has been cutting prices to defend its leadership. That triggered a price war in laundry and detergents and personal care, besides spurring increased spending on advertising and marketing.
“Our actions to defend our leadership position have yielded positive results,” said R. Sridhar, chief financial officer.
With commodities becoming dearer, HUL has started putting up prices as it continues to boost spending on ads and promotions. This rose 30 basis points to 13.8% of expenditure in the quarter due to the relaunch of Lifebuoy and the introduction of a new Lux variant. One basis point is one-hundredth of a percentage point.
This and other costs led to a 170 basis point decline in operating margin, the company said.
HUL rose 1.36% to Rs 305.65 on the Bombay Stock Exchange, while the benchmark Sensex rose 0.68% to 20,303.12 points.
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One-time gains played a key role. HUL had exceptional gains of Rs 40 crore from the sale of property and investments, compared with a year-ago, one-time loss of Rs 135 crore due to restructuring costs. The company also had other income from treasury operations.
Excluding other income, exceptional items and interest costs, profit from operations fell 2.3% to Rs 592 crore.
The maker of Surf, Wheel, Lux and Kissan ketchup, HUL recorded volume growth of 14%. Compared with a year ago, price growth is still negative by 3-3.5%.
On a sequential basis, pricing is flat to marginally positive, Nitin Paranjpe, chief executive officer, HUL, told reporters in Mumbai.
Going forward, HUL’s growth will be driven by a mix of volume and value as commodity prices remain firm. “This will be a win-win for the company and the consumer,” said Anand Mour, analyst with Indiabulls Securities Ltd, who expects HUL to make calibrated price increases as competitive intensity remains high.