But volume growth is the highlight of this quarter. HUL’s overall volume grew by 4.6%, compared with 1% in the September quarter and 2% in the June quarter. The firm has not given category-specific volume growth, but said that volume shares in soaps and detergents have risen over the September quarter. Some credit must go to a low base too and this effect will be visible till mid-fiscal 2011.

Graphic: Yogesh Kumar / Mint

Soap and detergent segments’ sales fell by 2.4% to Rs2,072 crore and profits declined by around 21%. Lower detergent prices, downtrading in detergents, higher ad spending and a high base effect are the key reasons for the decline. However, sales and profits are higher on a sequential basis, indicating some stability in performance.

But HUL’s second warhorse, personal products, came to the rescue. Sales rose by 15% and profits by 12.4%. Soaps and detergents contributed nearly half of sales. Personal products’ share was around 30% but its share of profits was much higher at 56%. Beverage sales were higher by 8% and would have been higher but for downtrading in tea.

HUL’s advertising expense grew 66%, part of its strategy to win back share and volume growth. Margins improved due to a 4.7% drop in input costs and a 4% fall in employee costs. Profit before tax and exceptional items rose by 3% to Rs781 crore. After its initial success, HUL has to show it can sustain volume growth and margins. A rise in input costs and competitive pressures in personal products will be key concerns. Its performance is the first good news for investors after a few dismal quarters; the stock declined only 1.7% on a day when the market fell by 3%.

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