Hind Lever net drops 15% to Rs 250 crore

HLL's net profit has dipped for the 7th consecutive quarter, however topline grew by 6.5%.

Hindustan Lever, the Indian arm of Unilever, today reported a 15.13 per cent drop in its net profit for the quarter ended March, 2005 at Rs 250.25 crore, down from Rs 294.88 crore in the corresponding period of the previous year.

This is the seventh consecutive quarter in which HLL has reported a decline in net profit. The fast-moving consumer goods company's net sales grew by 6.5 per cent -- from Rs 2,353.34 crore to Rs 2,506.38 crore in the quarter ended March 31, 2005, after a flat growth last year.

MS Banga, non-executive chairman of HLL, said the rise in the top line was not translated proportionately in the bottom line because of "continuing investments in brands and cost pressure owing to the rise in oil prices".

However, he added that the company was confident of improving its performance in the future. "We have recorded 6.9 per cent growth in continuing sales in the March quarter against flat growth last year. The growth will ensure us better profitability in future."

The earnings per share (EPS) in the January-March quarter stood at Rs 1.14 against Rs 1.34 in the year-ago period.

The Hindustan Lever stock today closed at Rs 137.70 on the Bombay Stock Exchange, 3.97 per cent lower than yesterday's close.

The turnover of the home and personal care business grew by 9.63 per cent to Rs 1,724.38 crore, thanks to price corrections undertaken by the company in some of its laundry and shampoo brands.

The turnover of the foods business declined by 2.96 per cent to Rs 1,572.81 crore because of a streamlining of the supply chain in processed foods.

Banga said: "Our strategy of investing in our brands has paid off even in the most competitive categories of hair care and laundry. On the cost front, the hardening of commodity prices presents an important challenge. We expect to improve our margin through judicious price increases and aggressive cost savings."

However, he did not elaborate on the timing of the price hikes.

Advertising and promotions increased slightly by 1.92 per cent to Rs 208.73 crore in the first quarter of 2005. Rising raw material costs have been impacting the profitability of its soaps and detergents business.

The profit before interest and tax in soaps and detergents declined from Rs 207.83 crore to Rs130.08 crore in the first quarter of 2005. The profit after taxes before exceptional items went down from Rs 302.91 crore to Rs 258.72 crore.

The implementation of the value-added tax in certain states had a marginal impact on the overall sales for the quarter, though it was more pronounced in certain categories like coffee, HLL said in a statement.

In the home and personal care business, big ticket brands like Rin, Surf, Wheel, Sunsilk, Clinic Plus, Close-Up and Lifebuoy recorded strong growth. Beverage sales were flat owing to a fall in coffee and squash sales, reflecting the phasing out of promotional activities.