Bogged down by an overall economic slump, depreciating rupee and a competitive environment, fast moving consumer goods major Hindustan Unilever has posted an underlying volume growth of four per cent, in line with the market expectations.
The maker of brands such as Dove, Lux and Lakme, however, had posted a nine per cent volume growth in the same period last fiscal.
The FMCG major further went on to disappoint the street with the first quarter (April-June) total income rising lower-than-expected seven per cent year-on-year at Rs 6,809 crore, though reported net profit fell by 28 per cent at Rs 1,019 crore (with a gain of Rs 120 crore) against Rs 1,331 crore in a year-ago period.
However, the figures are not comparative as in the year-ago period, the company had an exceptional gain of Rs 607 crore from the sale of its Gulita property in Mumbai and Whitefield in Bangalore.
So the actual net profit in the June quarter last year stood at Rs 694 crore. According to R. Sridhar, Chief Financial Officer, though the market growth rate slowed down for the last four quarters across categories , the company has continued to post good margins.
The increase in net margins was also due to increased advertising and promotional spends and continued investment in innovation.
"We have been talking about the three odd quarters of market growth rate slowing across premium and discretionary affected the categories which continued in the June quarter. Even the price component has failed to improve growth despite benign input commodity costs. However, a very strong improvement in margins at 70 basis points in a difficult environment best captures our June quarter results," Sridhar added.
While soaps and detergents grew eight per cent, hair care, oral care and colour cosmetics grew a mere two per cent.
Packaged foods grew by just five per cent despite relaunch of Knorr Soupy Noodles. However, beverages grew 16 per cent on back of good product mix.
Meanwhile, analysts are not optimistic about the second-quarter growth rates. They feel that slowdown will continue next quarter.