HUL posts 21% rise in Q2 profits

Hindustan Unilever, India's largest consumer goods maker, posted a 21%growth in its quarterly profit helped by price hikes and better-than-expected volume growth, pushing its shares up nearly 8% to its lifetime high on Monday.

However, the maker of brands such as Dove soap, Clinic shampoo and Close-Up toothpaste said rupee depreciation posed a challenge even as competitive pressures and input cost inflation showed little signs of easing in the near-term, with input prices rising by 25-40% from a year ago.
"Price growth was a larger component relative to volume growth especially in categories like soaps and detergents," Chief Financial Officer R Sridhar said in an earnings conference call.
The firm's soaps and detergents business which grew ahead of other product categories, registered a strong growth of 21.8%, largely led by pricing growth.
Demand for consumer goods in Asia's third-largest economy and the world's second-most populous nation, is expected to grow rapidly in the coming years from annual industry sales of USD 76 billion now as incomes rise.
The company, the Indian arm of Anglo-Dutch conglomerate Unilever Plc, said net profit rose 21% to Rs 690 crore (USD 141.4 million) for the fiscal second quarter ended September from Rs 570 crore a year ago.
The company, which counts the Indian units of Procter & Gamble and Colgate-Palmolive as rivals, beat a Reuters consensus net profit forecast of Rs 584 crore.
Shares in Hindustan Lever, which have risen 20% since the start of the year compared to a 14% drop in the main index, ended up 7.05% at Rs 375.8 in a weak Mumbai market.
Raw material costs, which remained high on year with cost of goods sold rising 340 basis points during the quarter, showed some tapering off sequentially pushing its operating profit margins up by 150 basis points.
Net sales of the firm, which the market values at USD 15.5 billion, grew 18% to Rs 5,520 crore, above a Reuters forecast of Rs 5,370 crore.
Sales at the home and personal care segment grew 20.5%, while its foods business grew 17%.
The Indian arm of Unilever also said its advertising and promotional expenditure, at 11.8% of sales, would be maintained at competitive levels.
"Compared to June quarter this quarter spends were higher but compared to a year ago it is lower than 200 basis points," Sridhar said.
The company also said brand investment were stepped up in personal products, beverages and packaged foods while spends in soaps and detergents were recalibrated in line with industry trends.
Hindustan Unilever also announced a tie-up with Tata Teleservices (Maharashtra) Ltd, for distribution of telecom products leveraging HUL's distribution network in rural markets in India.
"It is not a profit sharing model but for the services we provide there is a certain commission or fee that we will receive," Sridhar said, without sharing any financial details.