The Hindu Business Line : Cost savings, price hikes lift Hind Lever net 35%

Report card
FMCG sales grew 12.1 per cent driven by 13.9 per cent growth in home & personal care business and 3.9 per cent growth in foods
Exports grew 1.9 per cent though speciality business like castor and rice saw a negative growth
After adjusting for the disposal of Nihar brand, personal products segment revenue growth in the quarter was 15.1 per cent

TOP SHOT: Mr Harish Manwani, Chairman, Hindustan Lever Ltd, with Mr Doug Baillie, Chief Executive Officer, at a meeting in Bangalore on Sunday. — K. Murali Kumar

Bangalore , July 30

Cost savings and price increases lifted Hindustan Lever's net profit 35 per cent to Rs 380.59 crore on net sales of Rs 3,083.23 crore which grew 8.7 per cent during the second quarter (April-June).

Announcing the results, the Chairman, Mr Harish Manwani, told presspersons on Sunday that there was a 140 basis points increase in margins because of cost saving initiatives coupled with increased buying efficiency which partially neutralised the impact of escalating costs. A significant part of this margin increase was redeployed in supporting the brands for driving sales growth. Consequently, advertisement and promotion spend for the quarter was higher by 20.5 per cent.

Rise in oil prices

Mr Manwani said increase in oil prices and consequently rise in freight charges will continue to be a challenge for sustaining its margins. "Our strategy will be to manage the cost inflation and maintain our margins," he said.

"There has been a broad-based increase in all categories except tea business which was due to sluggish market growth," Mr Manwani said. He, however, declined to comment on whether the food business of the company was being relocated to Mumbai from Bangalore and also about the fate of Modern Foods. HLL's Chief Financial Officer, Mr D. Sundaram, said that FMCG sales grew 12.1 per cent driven by 13.9 per cent growth in HPC (home & personal care) business and 3.9 per cent growth in foods. He said growth in continuing businesses i.e., after eliminating impact of disposals, was higher at 10 per cent. After adjusting for the disposal of Nihar brand, personal products segment revenue growth in the quarter was 15.1 per cent. He said exports grew 1.9 per cent though speciality business like castor and rice saw a negative growth.

Interim dividend Rs 3

The processed foods business was beginning to show some momentum in growth. Meanwhile, HLL's board of directors has declared an interim dividend of Rs 3 per equity share of Re 1 each.

Mr Manwani said HLL was well positioned to take advantage of the fast-growing modern trade (large retail stores) business. "The good news is that at Unilever we understand modern trade," he said. He said that the growth in HLL's business in rural sector was good. "We are very pleased with our rural growth," he said. As per an AC Nielsen survey, in the FMCG industry, the rural segment grew 14 per cent while urban sector grew 8 per cent .

HLL's Chief Executive Officer, Mr Doug Baillie, said in the beverages, sluggish market growth impacted the tea business while coffee continued to grow. However, the beverage segment is expected to grow during the next quarter. "We have plans. We have work to be done in this category," Mr Baillie said. Mr Manwani said that in the tea segment, local players have made a dent while the big players maintained similar growth as in the past.

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