Hindustan Unilever sees demand staying subdued; net profit beats forecast

By Nandita Bose

MUMBAI (Reuters) - Sales growth at Hindustan Unilever stayed muted for the eighth straight quarter, hurt by a sluggish economy, and India's largest consumer goods maker said it did not expect a demand recovery in the near-term.

The company's results came after parent Anglo-Dutch consumer group Unilever Plc , which generates more than half of its revenue in developing markets, said emerging markets sales rose 6.6 percent, slower than the 8.4 percent growth in the fourth quarter.

"The pace of growth in the market is slow and there is a high level of inflation hurting consumer wallets," R. Sridhar, chief financial officer said on a conference call.

"It will be difficult to say when will there be an improvement in consumer sentiment but we are hoping it is going to be sooner rather than later," he said.

A normal monsoon, key to rural demand, and pre-election spending on consumer goods to woo voters in Asia's third-largest economy, failed to lift consumer spending as surging commodity prices and meagre salary increases weighed on incomes

. "The performance is deteriorating every quarter and it is causing more worry than it typically should because it's two years in a row with no recovery in sight, said G. Chokkalingam, founder of research and fund advisory company Equinomics.

Hindustan Unilever (HUL), which manufactures Fair & Lovely fairness cream and Sunsilk shampoo, said net profit for the quarter grew 11 percent to 8.7 billion rupees ($143.4 million). Net sales rose 8.9 percent year-on-year to 69.4 billion rupees.

Analysts on an average estimated a net profit of 8.5 billion rupees on sales of 70 billion rupees, according to Thomson Reuters Starmine Estimates.

Overall sales volumes in the March quarter grew 3 percent, below market estimates of 5 percent growth and lower than the 6 percent growth logged a year ago.

The personal care segment, which grew 8 percent, saw demand for skin, oral and hair care products slow further after growing 12 percent in the previous quarter and 12.7 percent in the same period a year earlier.

The company trades at 32.2 times its 12-month forward earnings, compared with 27.7 times for ITC Ltd and 29.7 times for Godrej Consumer , according to Thomson Reuters Starmine Smart Estimate.

Out of the 41 analysts covering the stock, 19 had a 'sell' rating along with six 'strong sell', while 13 had 'hold' recommendations along with two 'buy' and one 'strong buy'.

Shares of the company have risen 1.8 percent so far this year, compared with a 4 percent increase in the BSE consumer sector index.

($1=60.6550 rupees)

(Reporting by Nandita Bose; Editing by Gopakumar Warrier and Mark Potter)