Consumer products giant Hindustan Lever today posted a lower-than-expected 3.5 per cent rise in its third-quarter profits, sending its stock hurtling to a four-year low on the Bombay Stock Exchange (BSE).
Following a 7.2 per cent drop in net sales to Rs 2,367.46 crore during the quarter, net profit increased only marginally to Rs 413.29 crore from Rs 399.17 crore in the corresponding quarter of last year.
Explaining the performance, HLL director finance D Sundaram said the markets for its main product categories had declined in value in the third quarter though margins had improved.
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The HLL scrip dived almost 5.6 per cent to Rs 158.30 a share in intra-day trades, its lowest since December 1998, before closing at Rs 160.95 on the BSE.
Sundaram said against "all adversity", HLLs operating margins had improved to 17.7 per cent in the quarter ended September 2002 from 13.8 per cent in the corresponding quarter of last year, even though advertising and promotional expenses were almost 25 per cent higher.
"If one were to take comparable items, net profit is actually up 11.2 per cent," Sundaram said.
The company had also booked a loss of Rs 6.84 crore on the sale of its mushrooms business this year, and stopped traded exports, resulting in a fall in sales, he said.
"The home and personal care power brands have grown 6.8 per cent despite a declining market. Lifebuoy, Lux, Wheel, Fair & Lovely, Ponds, Pears and Lakme, all have recorded a double digit growth," Sundaram added.
But the companys tea business had been hit by lower prices. However, FMCG analysts feel the HLLs results for the next quarter could be worse as the effect of the drought would take a stronger grip, as almost 50 per cent of HLLs sales come from rural India.