HLL Q2 Profit Up 4 PC

Mumbai, October 25: | Updated: Oct 26 2002, 05:30am hrs
Hindustan Lever has registered a marginal increase of 3.53 per cent in net profit at Rs 413.29 crore for the second quarter ended September, as against Rs 399.17 crore for the corresponding period previous fiscal. However, net profit growth is much higher when one removes the effect of exceptional items. Net profit (before exceptional items) grew 11.2 per cent to Rs 420.13 crore compared with Rs 377.65 in the corresponding period.

During the quarter under review, net sales declined by 7.20 per cent to Rs 2,367.46 crore (Rs 2,551.40 crore).

The HLL shares closed at Rs 160.95 on the BSE on Friday, down by Rs 6.75 from its previous close. The stock after opening at Rs 167.50, reached a high of Rs 167.85 and a low of Rs 158.30 on volumes of 25.27 lakh shares.

Commenting on the quarters performance, chairman and managing director MS Banga said,our home and personal care power brands have grown by 6.8 per cent despite a declining market. Lifebuoy, Lux, Wheel, Fair & Lovely, Ponds, Pears and Lakme, all recorded double digit growth. We achieved this through innovation and activation programs backed by a 24 per cent increase in brand support. In line with our strategy, porfitability focus in foods continues. Gross margins have moved up by 3.5 per cent in beverages, 3.3 per cent in foods and 16 per cent in ice cream. The benefits of this improvement have been partially ploughed back into brand support investments, he added.

HLLs soaps and detergents business grew by 2.8 per cent led by a strong personal wash growth of 11.1 per cent. Lifebuoy and Lux performed exceptionally well and grew by 35 per cent and 11 per cent, respectively. In the fabric wash market, its share was held although sales declined during the quarter.

According to an analyst tracking the FMCG sector, the results have been slightly weaker than expected. Although the food and fabric wash segments have underperformed, the head care and skincare business have shown a very encouraging performances.

Personal products grew by 9.5 per cent led by a 48.6 per cent growth in skin category. While Fair & Lovely grew by 43 per cent, Ponds posted a growth of 11 per cent and Lakme 16 per cent. In oral care, the market share was steady although sales declined during the quarter. The declining trend in shampoo sales was reversed by a successful relaunch of Clinic.

Said HLL group treasures and head - M&A & Investor Relations, SP Mustafa: With the introduction of new smaller variants of shampoo bottles, consumption has gone up substantially during the quarter. The loss from the ice cream business has gone down from Rs 8.6 crore to Rs 1.5 crore. This has been possible by focussing on premium product range and also managing the supply chain in a cost effective manner.

Analysts also believe that the strategy margin expansion can work for a shorter period, it is difficult to sustain such a strategy. Eventually, topline driven growth is needed for healthy growth. Avenues for margin expansion will not be for ever.