Hindustan Unilever (HUL) reported an 18 per cent growth in net profit to Rs 753.81 crore for the quarter ended December 31, 2011, as the country’s largest FMCG (fast-moving consumer goods) company rode on the back of prices hikes as well as volume-led growth that saw its net sales increase by 16.5 per cent during the quarter. It stood at Rs 5,852.73 crore versus Rs 5,027.01 crore a year ago. HUL, though, warned of growing competitive and cost pressures, raising concerns about its ability to maintain the volume growth.
A surprisingly large seven percent drop in advertising and promotional spending costs also unsettled investors, who knocked the stock down as much as 4.2 percent on Monday .
Price-led growth for the December quarter was 7.4 per cent, while volume-led growth was 9.1 per cent, HUL chief financial officer R Sridhar said on Monday.
“In comparison to the previous three quarters, when the FMCG market overall grew by 13-14 per cent, the December quarter saw overall market growth of just about 10 per cent. Against this backdrop, we have grown ahead of industry,” he told a press conference here.
Apart from prices hikes and sales volumes, judicious cost management helped HUL during the quarter. In comparison to the year-ago period, the company decreased advertising & sales promotion expenditure by 300 basis points, while the distribution expenditure was brought down by 120 basis points between October and December 2011. The result of these measures was that operating margins were up 230 basis points during the quarter. Input costs, however, were up 140 basis points during the quarter, Sridhar said.
In the third quarter, HUL had restructuring costs of Rs 12.38 crore, while the figure was Rs 85 lakh during the year-ago period. Besides, profit on sale of properties was Rs 49.22 crore, while the company recorded Rs 15.92 crore profit on sale of long-term trade investments.
Among key segments, soaps & detergents, sales rose nearly 21 per cent year-on-year to Rs 2,645.97 crore, while the sales of personal products increased by 14 per cent from a year ago to Rs 1,886.17 crore in the third quarter. HUL also said beverage sales in the quarter rose 11.3 per cent from a year ago to Rs 670.38 crore and packaged foods saw sales grow 13.5 per cent to Rs 306.41 crore in the December quarter.
However, the sales from other divisions, which include its PureIt water purifier and chemicals business, fell 11.6 per cent -- to Rs 98.21 crore.
While HUL does not provide guidance for the forthcoming quarters, Sridhar said the company would continue to apply the model it had in the third quarter of judicious cost management and investment wherever needed to maintain growth.
The stock of HUL was down on Monday by 3.49 per cent -- to Rs 386.7 at the end of trade on the Bombay Stock Exchange (BSE). The intra-day high was Rs 410.5, while intra-day low was Rs 384.35.
