The country’s largest consumer goods company by sales, Hindustan Unilever Ltd (HUL), has reported a 2.6 per cent fall in net profit to ₹962 crore in the second quarter ended September, against ₹988 crore in the corresponding period last year.
The marginal fall in the profit was due to increased expenses with price cuts across segments and removal of excise duty benefits. Besides, the FMCG major had an exceptional gain of ₹49.2 crore via sale of properties in the September quarter last year, which improved its margins in that quarter.
During the period, the company’s total income increased to ₹8,125.5 crore from ₹7,837 crore for the same period last year, rising 3.68 per cent.
Harish Manwani, Chairman of the company, said that despite a challenging economic environment, HUL delivered a profitable quarter with the underlying volume growth up by 7 per cent against 5 per cent in the corresponding quarter last year. “We continue to invest in our brands and in-market executional capabilities to drive the competitiveness of our portfolio. Both our rural and urban markets are growing at a similar rate,” he added.
“The deflationary commodity cost environment is likely to continue in the near term and our strategy of delivering consistent and competitive growth with sustainable improvement in the operating margin remains unchanged,” he said.
During the quarter, HUL’s domestic consumer business grew at 5 per cent, with 7 per cent underlying volume growth.
Segment-wise performance HUL said that during the quarter its Soaps and Detergents business witnessed robust volume growth, but the benefit was partially offset by price deflation.
Growth in the skin cleansing business was driven by double-digit volume growth and its liquids portfolio registered another quarter of robust growth. In laundry, growth was led by the premium segment.
The company said its household care growth was driven by Vim. The segment witnessed further price deflation in the quarter due to soft commodity costs.
The personal products division reported double-digit growth. Skin care products delivered broad-based growth, while hair-care maintained its momentum with another quarter of volume-led double-digit growth, the company said.
Meanwhile, analysts are of the view that while price cuts and increased sales promotions partly eroded the commodity-tailwind benefits, the gap with regional players is being reduced.
“We expect the pace of ‘premiumisation’ to pick up again. The Q2FY16 volume uptick is a testimony of this trend and we remain confident that Hindustan Unilever will maintain its position as a market leader,” said Nitin Mathur of research firm Societe Generale.
HUL’s board of directors has declared an interim dividend of ₹6.5 per equity share of face value ₹1 each, for the year ending March 31, 2016.