Personal care, foods units soup up HUL June quarter

CORPORATE SCORECARD

Backed by selective price increases and cost cutting initiatives, India's largest fast-moving consumer goods company, Hindustan Unilever, reported a 29.55 per cent growth in net profit to Rs 493 crore for the quarter ended June 2007 compared with Rs 380.59 crore in the comparable quarter last year.

The performance was important against a backdrop of the company reporting a decline in profits in the previous two sequential quarters, said analysts. "Things are looking better for them," said an analyst.

"We have sustained our strong growth momentum across home and personal care and foods businesses. The corner stone of our strategy is to continuously strengthen our portfolio and deliver consistent and profitable growth," HUL Chairman Harish Manwani said.

"The challenge of inflationary pressure continues and will be met through a combination of selective price increases and cost leadership across the extended supply chain," he added. The company also announced an interim dividend of 300 per cent (Rs 3 a share of Re 1) for the year 2007. The dividend will be payable on August 22.

The company's net sales for the quarter was Rs 3,481 crore, a growth of 13 per cent. The company added that its home & personal care business grew 11.1 per cent as brands in the laundry and shampoo categories continued to perform well.

The skin category was impacted by a planned reduction of stocks in the distribution pipeline, as the company prepared for the Fair & Lovely relaunch in July 2007.

The company's oral category growth was led by its gel toothpaste brand, Close Up.

The foods business registered a sales growth of 25 per cent, while the beverages business grew by 21 per cent with all tea brands, Taj, 3 Roses, Red Label and Taaza doing well. The company claimed that Bru Coffee continued its performance this quarter.

The Knorr and Kissan brands were the key drivers of a 38 per cent growth in the processed foods category, while the ice-cream business had a robust 24 per cent growth.

The key innovations during the quarter were the launches of Knorr Chinese mixes, Bru Iced cappuccino and the Moo ice cream range.

On its water business, the company said its national rollout is progressing well and now covers all the Southern states, Maharashtra and West Bengal.

Judicious price increases together with buying efficiencies and aggressive cost saving initiatives helped sustain gross margins despite the impact of escalating costs.

Analysts said price hikes added 5.6 per cent to the top line growth.

The company admitted that its adspend continued to be competitive and the lower expenditure for the quarter reflects the planned phasing of activities and the lower spend in television channels, as the deals in some networks are undergoing negotiations. On falling market share in certain segments, Manwani said: "Please look at category numbers, overall we have grown but in certain sections, we have a stance, we believe in improving quality. Our business in core categories has given us higher sales numbers. it is an all-rounded growth.

On cost pressures, Manwani said the company has a very strong R&D. "We have improved our cost effectiveness. We may do price hikes strategically. But we have an advantage of being big in size, it is the economy of scale. We are not affected by minor fluctuations."

On the response on Knorr, Manwani said: "We have got excellent response on Knorr Chinese soup mixes. Unilever has several Knorr variants in the Unilever portfolio, although the market size for that is small right now but we will be launching more products."