Price cuts on soaps, detergents, hit HUL Q2 profit

Weak monsoon and rising food prices affected demand

Hindustan Unilever Ltd , India's largest consumer goods firm, said price cuts for key products including soaps and detergents dragged down its profit in the second quarter, missing market estimates despite improved sales.

Grappling with weaker demand in rural India, the Indian unit of the Anglo-Dutch consumer group Unilever Plc had slashed prices for items like its Lux soap -- part of a segment which accounts for nearly half its revenue.

That helped drive sales volumes up 7% and revenues up 5%, but hit the bottom line, the company said.

"We don't see a substantial step up in rural growth compared with what we have had in the past," PB Balaji, the company's chief financial officer told reporters on Wednesday.
 

 

HUL, seen as a barometer of Indian consumer sentiment, has been under pressure in recent quarters. Demand from India's villages contributes about 35% to its total sales, but a weak monsoon and rising food prices have squeezed households.

Balaji said he expects future growth to be driven by volume, as raw materials have become cheaper in recent months.

The maker of Lipton Tea and Dove shampoos posted a quarterly net profit of Rs 962 crore ($147.9 million), down from Rs 988 crore a year earlier. Net sales climbed to Rs 7,820 crore rupees.

Analysts on average were expecting a profit of Rs 1,043 crore, according to Thomson Reuters data.

($1 = 65.0400 Indian rupees)