The Hindu Business Line : Hind Lever PAT takes a 21% dip in Q1

COMPETITIVE pressures appear to have finally caught up with Hindustan Lever Ltd (HLL) as the FMCG major ended the first quarter of 2004 with a 21 per cent decline in profit after tax at Rs 302.91 crore (Rs 382.92 crore).

If an exceptional item (an outgo of Rs 8.03 crore) is included, PAT goes down further to Rs 294.88 crore, a fall of 22.9 per cent.

PAT was dragged down on account of price reductions, higher brand investments, lower financial income and interest payable on bonus debentures. Company officials said that price cuts were put in place for some categories to match up to competition. According to Mr S.P. Mustafa, Group Treasurer, HLL, financial income was lower because of the drop in interest rate.

Topline was largely flat at Rs 2,353.34 crore as compared to Rs 2,370.93 crore in the year-ago quarter. Continuing sales moved up by three per cent.

EBIT declined by 13.7 per cent because of the pricing reductions as well as trade rebates.

Reduction in prices did help improve volume growth in home and personal care (HPC) by seven per cent during the quarter. But in value terms the growth was lower at 3.5 per cent because of price cuts. "Our decisive action on pricing helped volume growth. We also went into for an aggressive shampoo launch during this quarter," Mr D. Sundaram, Director-Finance, HLL said.

Personal wash grew by nine per cent in value terms but in laundry sales value was lagging. Skin notched a 17 per cent increase in sales value while shampoos declined by 11 per cent. "Innovation and pricing plans will accelerate growth in shampoos," Mr Sundaram said in terms of an outlook. Toothpaste decline by 9.6 per cent in sales value primarily because of fall in Close-up. HLL plans to relaunch Close-up during the June quarter. Colour cosmetics had an `explosive' growth by 36 per cent. The foods category edged up by 1.4 per cent. Within this category, power brands, which account for 88 per cent of revenue, grew by eight per cent during the quarter. But within the foods category, atta declined both in volume as well as value sales. Going forward, HLL will focus on profitable geographies for atta business. Tea sales value was flat while coffee grew by 21 per cent led by volume growth and low unit price. Within the processed foods category, culinary products reported a five per cent increase in sales, salt four per cent and ice-cream two per cent.

While overall FMCG exports improved by five per cent, speciality exports especially marine products were down by nine per cent. Mr Sundaram said that dollar depreciation against the rupee did impact earnings in the case of marine exports. Besides, there was an issue of anti-dumping in marine exports.

The share price of HLL ended down at Rs 143.95 as compared to the previous close of Rs 144.85 on BSE.

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