The Hindu Business Line : Cost saving measures to help bottomline growth: Hind Lever

HINDUSTAN Lever Ltd, which reported a 14.58-per cent decline in its first quarter profit-after-tax (before exceptional items) to Rs 258.72 crore, expects its actions on cost reduction, judicial pricing and strengthening of brands to help towards bottomline growth.

Input cost increases mainly brought on by rising crude oil prices continued to impact profit margins.

The company's net sales moved up 6.5 per cent to Rs 2,506.38 crore (Rs 2,353.34 crore) with revenues from domestic FMCG-HPC business up 9.64 per cent at Rs 1,724.38 crore (Rs 1,572.81 crore) and that of foods (including ice cream) dipping by 2.96 per cent to Rs 389.86 crore (Rs 401.76 crore). HLL's efforts to restructure supply chain and distribution in its foods business are expected to deliver strong growth in this division in the coming quarters, Mr M.S. Banga, Chairman, HLL, said.

Exports during the quarter rose to Rs 342.14 crore (Rs 303.70 crore).

Total expenditure increased by 13.52 per cent to Rs 2,262.91 crore (Rs 1,993.43 crore), including a 17.36 per cent rise in cost of raw materials and packaging to Rs 1,147.43 crore (Rs 977.66 crore).

Gross profit was lower at Rs 313.55 crore (Rs 399.47 crore) with profit before interest and tax down by 26.84 per cent to Rs 262.62 crore (Rs 358.96 crore).

Foods business revenue moved down because the company opted for frequent replenishment of its squash sales as against its normal practice of selling its squash upfront ahead of the monsoon season.

Most of the brands within foods and beverages had grown well during the quarter.

Raw material cost scenario is not expected to ease this fiscal, Mr Banga told newspersons.

"However, all our cost reduction measures will kick in. Besides, prices increases taken on some product categories should help improve bottomline,'' he said.

He said the company was witnessing robust growth in 2005. "Our objective is profitable growth,'' he said.

Mr Banga also said the company would be making a foray into children's nutrition products, an initiative put forth by Unilever.

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