Lever H1 Net Rises 31.7%

Buoyed by high growth in core categories, Hindustan Lever, the country's largest multinational, posted a 31.7 per cent rise in net profit to Rs 328.60 crore in the first six months of 1998, while net sales rose 19.8 per cent to Rs 4,661.87 crore.

The company has announced an interim dividend of Rs 9.6 per share. Its annualised EPS has risen to Rs 33 against Rs 25.74 in the first half of 1997. The results do not include those of Pond's India as the merger has not been cleared by the High Court.

In the first half of 1997, Lever had posted sales of Rs 3,891 crore and net profit before exceptional items of Rs 249.58 crore.

 

Lever's performance was in line with market expectations and the company's own projections that it would achieve 20 per cent plus growth in sales and profits every year.

The share price, which had been moving up sharply, fell yesterday by Rs 15 to Rs 1,709 per share. Market sources attributed this to profit booking.

Lever's growth was led by volume growth in soaps and detergents, personal products and beverages, which together contribute more than 60 per cent of its annual turnover. Beverages stole the show, with turnover jumping 40 per cent and volumes rising five per cent. In personal products, where Lever has strong brands like Clinic and Sunsilk shampoos and Pepsodent toothpaste, volumes grew 20 per cent. Soaps and detergents grew 6 per cent in volume. Lever increased its market share in soaps by 1 per cent despite sluggish growth in the saturated market. Lever's profit before tax grew 26.9 per cent to Rs 450.60 crore, while exports grew 80 per cent to Rs 924 crore. The net profit figure of Rs 328.6 crore is before exceptional items.

Speaking to reporters in Mumbai yesterday, chairman K B Dadiseth, said he was satisfied with the performance. Net margins have risen from 6.5 per cent to 7.1 per cent and return on networth remains at a strong 47 per cent. Operating profit has grown by 26.4 per cent.

However, the economic recession has started pinching the multinational giant. Most of the growth has come from only three categories, while the rest are still struggling. Ice-creams, dairy, culinary businesses are making losses.

"The markets are tough. There is a cause for concern. Growth has slowed down even in our prime categories like personal products.," said Daidseth.

He announced that the company is undertaking a serious cost-cutting exercise to grow in the new scenario. The exercise is being done all over the company.

In dairy, Dadiseth said Lever is examining strategic options including a possible sale. "It is a small business and not relevant considering the large turnover of the group. We are looking to see if it fits in with our strategic business plan," he added. The popular foods business of Lever, which runs the Kissan Annapurna brand, has grown by over 60 per cent. Lever plans to add more categories apart from the existing ones of atta and salt.