HUL`s net dips 3% despite 23% rise in operating profit

Led by price hikes and high consumer demand across categories, fast moving consumer goods major Hindustan Unilever (HUL) achieved a growth of 22.7 per cent in operating profit to Rs 448.8 crore in the first quarter ended March 31, 2008 over the corresponding quarter last year. Net sales grew 19.1 per cent to Rs 3,793.9 crore year-on-year.

 

However, the company's net profit dipped 3 per cent to Rs 380.95 crore from Rs 393 crore in the corresponding quarter last year. Last year's profit included an exceptional gain of Rs 59 crore.

Harish Manwani, chairman, HUL, said, "Inflationary pressures are a cause for concern but market growth continues to be strong. There is no evidence as yet of any significant impact on consumer spending in our FMCG categories. We are confident of effectively managing the inflationary challenges."

In spite of a result in line with expectations, its share price on the Bombay Stock Exchange dipped by 1 per cent to Rs 247.2 in a weak market.

Sameer Deshmukh, research analyst at IL&FS, said, "Though the performance, in terms of top-line, has been impressive, one has to remember the fact that there has been a raw material cost pressure and, hence, the price hikes taken by the company (approximately 9 per cent) are also factored in the sales numbers. Operating margins, excluding other income, have actually fallen by 70 basis points to 10.6 per cent year-on-year. Its profit before interest (PBIT) margin shows a growth of 30 basis points to 11.8 per cent only when other income is included."

During the quarter, HUL's soap and detergent business grew by 19.8 per cent driven by growth in Surf, Rin and Wheel detergent brands while personal care product revenues grew by 23.4 per cent fuelled by sales of skin care products.

The processed food business grew 15.4 per cent, beverages 15.8 per cent and ice creams 14.1 per cent. The company's profits in personal care, foods, beverages and ice creams were impacted were impacted by high expenditure in advertising and promotion and new launches, such as Amaze brain food.

Capital employed on soaps and detergents for the quarter went up by 96 per cent to Rs 314.18 crore. In beverages, it went up by 48 per cent to Rs 137 crore while in processed foods, it shot up by 63.5 per cent to Rs 15.08 crore.

The expenditure in personal products rose 1.6 per cent to Rs 115.26 crore. The company said it would maintain its investments across categories for the coming quarters.