The Hindu Business Line : HLL net profit drops 32 pc

Mr M.S. Banga (right), Non-Executive Chairman, Hindustan Lever Ltd, and Mr D. Sundaram, Director (Finance), addressing a press conference in Mumbai on Friday. - Paul Noronha

Mumbai , Feb. 11

HINDUSTAN Lever Ltd continued its disappointing performance, reporting a 32-per cent fall in both fourth quarter and full-year net profits.

Net profit for the December quarter was Rs 333.67 crore (Rs 494.72 crore) and for the full year Rs 1,197.36 crore (Rs 1,771.79 crore) .

Turnover for the year 2004 declined 2 per cent to Rs 9,926.95 crore, while it increased marginally to Rs Rs 2,600.83 crore in the fourth quarter from Rs 2,583.48 crore in the year-ago period.

The 32-per cent decline was already evident at the EBIT level (Earnings Before Interest and Tax) in the December quarter, when profits stood at Rs 430 crore (Rs 632 crore).

Mr D. Sundaram, Director - Finance, in a joint presentation to the press and analysts, said initiatives to counter competitive moves in the laundry and hair care segments, supply chain restructuring in the foods division and increased advertising and promotional spend drove profitability down.

The consumer goods company took a hit of Rs 30.5 crore during the year as exit costs of its confectionary business Max. Another Rs 87 crore was written off from investments in Modern Foods.

In the December quarter, HLL witnessed an 8-per cent growth in value and volume sales of its laundry portfolio, helped by brands Rin, Surf and Wheel.

The skin segment grew 8 per cent. In shampoos, volumes grew 28.8 per cent but value growth dropped due to price reduction.

HPC (home and personal care) volumes grew 5 per cent and value by 3.4 per cent. Advertising spends on HPC were increased 25 per cent year-on-year.

Beverages grew 7 per cent in value during the December quarter. Brooke Bond reported a 15.5-per cent growth in sales. "Brand rationalisation in tea has been completed; this should result in further growth in the coming quarters," Mr Sundaram said.

In processed foods, primary sales declined 42 per cent, due to phased stock reduction and defocusing on atta in unviable geographies.

According to Mr M.S. Banga, Chairman, HLL, gross margins in the major atta consuming regions of the country are as low as 3-4 per cent, making a branded product unviable.

Some of the brands that dragged profitability during the quarter were Lux, Ayush and Sunsilk. Lux faced competition from low-cost soaps including Godrej No. 1 and Nirma.

Ayush's progress, especially in trade, has been below expectation, Mr Banga said. However, it has done well in the HLL Network and Ayush Therapy Centres. Other channels such as Shakti, HLL Network and Lakme Salons have grown, he said.

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