Hindustan Unilever sales volumes disappoint as urban shoppers stay away

By Nivedita Bhattacharjee

MUMBAI (Reuters) - Hindustan Unilever Ltd, the Indian unit of Anglo-Dutch consumer group Unilever Plc , saw weaker than expected growth in quarterly sales volumes as urban shoppers avoided making big purchases, dragging its shares down more than 5 percent.

For the quarter ended Dec. 31, the maker of products such as Dove soap, Sunsilk shampoo and Lipton tea, posted a 3 percent rise in volumes, while analysts, on average, were expecting to see a rise of about 6 percent.

Hindustan Unilever makes about 60 percent of its sales from urban consumers. During the quarter, rural shoppers bought more than their city counterparts, but those purchases were mostly in low-priced small packs and sachets, chief financial officer PB Balaji told reporters.

The company, Asia's largest consumer goods maker by market capitalisation, has been hurt in the last few quarters by weaker consumer demand in Asia's third-largest economy that grew less than 5 percent in the past two fiscal years.

The weak volumes are likely to reflect on parent Unilever, which makes more than half of its sales from emerging markets. Unilever is set to announce its results on Jan. 20.

Balaji said Hindustan Unilever had started bringing down sticker prices on some of its products as it passed on the benefits of lower material costs like oil, in a bid to boost volumes.

"We had to stop sales for a few days as we cleared the pipeline to get the fresh prices in stores. Without that, we expect volumes would have been in the range of what was expected," Balaji said.

Hindustan Unilever's standalone net profit for the three months to Dec. 31 rose to 12.52 billion rupees ($202.85 million) from 10.62 billion rupees a year earlier, the company said in a statement. During the quarter, there was an exceptional gain of 3.97 billion rupees, it said.

Analysts were expecting Hindustan Unilever to make 10.81 billion rupees in profit, according to Thomson Reuters data.

Without accounting for the exceptional gain, which was mostly made from a sale of company property, the results were weaker than expected, analysts said.

A sharp easing of inflation since September, an improvement in consumer sentiment on hopes of a revival in economic growth and a fall in commodity prices had pushed the Hindustan Unilever stock up about a third since October, before Monday's fall.

Hindustan Unilever's shares fell as much as 5.8 percent on Monday, their biggest one-day fall since July 2009, before recovering slightly to end down 5.2 percent.

($1 = 61.7200 rupees)

(Additional reporting by Abhishek Vishnoi; Editing by Muralikumar Anantharaman)