Mumbai: Hindustan Unilever, India’s largest consumer goods maker, on Saturday reported a 21.6% drop in net profit for the September quarter, below forecasts, due to mark-to-market forex losses and restructuring costs.
The company, which makes popular soaps such as Lux, Dove and Surf detergent, expects growth in volumes to be sustained but expressed concerns over the lag effect of the poor monsoon rains, thew rise in commodity prices, inflation and interest rates.
“We would expect the FMCG (fast moving consumer goods) sector to continue to grow but we have yet to ascertain what impact the poor monsoons will have and the rise in consumer prices,” chief financial officer R Sridhar told reporters on a conference call.
Hindustan Unilever does not provide any forward looking statements.
The company, a unit of Anglo-Dutch firm Unilever Plc reported a net profit of Rs429 crore ($91.35 million) down from Rs547 crore a year ago. Net sales rose to Rs4,228 crore from Rs4,028 crore a year earlier.
A Reuters poll of 10 brokerages forecast net profit at Rs485 crore on net sales of Rs4,390 crore.
The company has stepped up brand investments by 320 basis points, while it is relaunching several of its products including Lux, all of which are expected to take effect in future quarters, Sridhar said.
Profit in the September quarter were hit by charge of Rs91.3 million on account of a mark-to-market loss on forward covers and restructuring cost of Rs166 crore incurred as settlement for workers of one of its closed units, the company said.
The growth in sales was largely driven by personal products and food products categories, both of which increased 13 percent from year ago, Sridhar said.
Soaps and detergents rose at a lower rate as consumers opted for cheaper priced products.
Operating margin rose 140 basis points due to competitive pricing, better product-mix and better cost management.
The fast-moving-consumer-goods sector in India, estimated to be valued at more than $17 billion, has seen double digit growth in sales in the last couple of years.
Last week cigarettes, hotels and lifestyle apparels firm ITC Ltd, which competes with Hindustan Unilever in toiletries and branded foods segment, reported a 26% rise in September quarter net profit to Rs1,010 crore, above forecasts.
HLL shares, valued at $13.1 billion, have risen about 13% so far this year, against a 65% rise in the main index and 41% rise in the sector index
On Friday the company’s shares closed down marginally at Rs282.95.