India?s largest FMCG company Hindustan Unilever Ltd (HUL) on Sunday said its net profit rose 30% to Rs 493.08 crore in the second quarter ended June 2007 compared with Rs 380.59 crore in the corresponding period previous fiscal. Net sales for the quarter rose 13% to Rs 3,481.40 crore.
The growth was driven by a 13.4% growth in the FMCG business, better cost management and buying efficiency. Of the FMCG growth of 13.4%, just 5.8 % was through volume while the remaining was through price increases on products, said D Sundaram, director-finance, HUL.
HUL also announced a buyback of 2.7 crore shares at a price not exceeding Rs 230 a share and up to a total amount of Rs 630 crore, being within 25% of the total paid-up capital and free reserves as per its balance sheet on December 31, 2006. The buyback is to ?effectively utilise the surplus cash and make the balance sheet leaner and more efficient to improve returns?, HUL said. The price is at a premium of 17% over the closing price of the company?s share on Friday, July 27. HUL shares closed at Rs 196.45 on the BSE on Friday. The average closing price of the share for the last six months is Rs 196.
?We have Rs 2,400 crore in cash, and our balance sheet is debt free,? explained Sundaram. ?We want to use these cash surplus effectively, to increase our returns.? Interestingly, for the quarter under review, HUL spent Rs 336.04 crore on advertising & promotions (A&P), lower than Rs 345.27 crore in Q2 last year. ?A&P spend is to strengthen brands, drive growth and market share,? said Sundaram, adding the company would keep reviewing its A&P spend from time to time.
HUL?s home & personal Care (HPC) business grew 11.1% during the quarter. Laundry and shampoo continued to perform well. Personal wash growth was driven by a strong performance in Lux and Breeze. However, the skin category was impacted by a planned reduction of stocks in the distribution pipeline in preparation for Fair & Lovely relaunch in July 2007. Oral category growth was led by Close Up.