Financial Daily from THE HINDU group of publications
Tuesday, Apr 16, 2002
Corporate Results - Personal Products
Hind Lever sales dip 10 pc, net rises 26 pc in Q1
MUMBAI, April 15
FMCG major Hindustan Lever Ltd (HLL) today reported a 26.2 per cent rise in net profit to Rs 428.54 crore for the first quarter ended March 31, 2002, as against Rs 339.53 crore in the year-ago period.
This includes exceptional income of Rs 74.72 crore (Rs 22.59 crore for the previous corresponding period), arising from profit on disposal of the company's seeds business.
However, HLL's sales, net of excise, dipped by 9.9 per cent to Rs 2,380.66 crore (Rs 2642.51 crore). Domestic FMCG sales for the period were Rs 2,026.73 crore (Rs 2,142.92 crore), while exports accounted for Rs 301.88 crore (Rs 435.12 crore). Other income was Rs 95.93 crore (Rs 102.20 crore). Operating profits rose by 15.7 per cent, while profit after tax but before exceptional items grew by 11.6 per cent. HLL's advertising and promotion has risen to Rs 224.86 crore (Rs 197.39 crore). Since the results are not fully comparable on a quarter-to-quarter basis, HLL's statement pointed out, "On a comparable basis, the underlying results would reflect a sales decline of 10.1 per cent and an operating profit increase of 19.5 per cent.''
"Despite the company citing in advance a fall in sales for the March quarter of 2002, the sales decline of 10 per cent is quite alarming,'' said Mr. K. Ramachandran, Head of Research, Tata TD Waterhouse Securities Ltd. At the BSE, HLL's stock slipped from the previous Rs 224 to close today at Rs 222.95.
Mr M.S. Banga, Chairman, HLL, said in the statement, "We have delivered a 15.7 per cent growth in our operating profit despite lower sales, through a richer portfolio and continued `cost management'. Sales were lower due to the continued sluggishness in FMCG markets with several categories declining in value. Reflecting this, we believe that retail stocks have also come down.'' The company has discontinued non-value added traded exports and enhanced profitability in foods at the cost of short-term volume. On the future, Mr Banga said, "Improved agricultural growth should boost rural demand, albeit with a lag.''
On its proposed issue of bonus debentures, HLL said, "Given the current proposals in the Finance Bill 2002 relating to change in taxation of dividends, the company is awaiting finalisation of the same, following which appropriate action for implementation/modification of the scheme will be taken.''
Later talking to Business Line, both Mr M.K. Sharma, Vice-Chairman, and Mr D. Sundaram, Director (Finance), said there is no question of the company reneging on the proposal. With its various business segments, HLL's revenue from soaps and detergents fell by 4.3 per cent, sales in personal wash category dipped by 6.1 per cent, sales in fabric wash declined by 5.2 per cent and that in personal products fell by 7.8 per cent overall.
However, the household care segment grew by 12.6 per cent. The beverages segment recorded a 13.9 per cent rise in profits, while gross margins in foods rose by 400 basis points.
A seven per cent increase in agricultural income, a slew of innovations and price reductions are expected to translate into improved consumption of FMCG goods, Mr. Sundaram said. "The growth in agricultural income reported in the December 2001 quarter must feed into the FMCG sector,'' Mr. Sundaram said adding that some of the innovations and price reductions by HLL will begin to have its impact. According to him, the drop in topline is indicative of a larger trend across the sector. HLL's 10 per cent fall in topline includes a 4 per cent fall due to the discontinuing of its traded exports.
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