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Journalism of Courage
Consumer goods firm Hindustan Unilever Ltd announced 11 per cent rise in its net profit at Rs 872 crore for the quarter ended March 2014 on the back of a strong 9 per cent growth in domestic sales and a sharp improvement in its operating profit margin.
While the revenues grew by 9.7 per cent to Rs 7,094 crore in the quarter, the overall growth in volumes for the company stood at 3 per cent. The operating profit margin rose to 18.24 per cent in the quarter ended March 2014, up from 16.8 per cent a year ago.
The company acknowledged that the operating environment remained “challenging” with pressures on account of rising input cost, slowing market growth and highly competitive intensity. “Firm input costs were managed through a mix of judicious pricing and cost savings. Brand investments were sustained at competitive levels with higher advertising spend being offset by lower promotional activities,” the company said.
For the full year ended March 2014, the company’s net profit rose by only 2 per cent to Rs 3,867 crore.
The domestic consumer business grew by 9 per cent while the volumes rose by 4 per cent for the year.
HUL chairman Harish Manwani, however, exuded confidence on performing well even in a challenging environment. “We stepped up investment behind our brands and innovations, whilst driving cost savings and operational efficiencies with even greater rigor. Looking ahead, we are confident that our strategy is on track to deliver sustainable long term growth and margin improvement,” he said.
Among various business segments, the skin cleansing segment delivered double-digit growth while the premium segment in the laundry business did well. Overall, the revenues from the dominant soaps and detergent business grew by 7.7 per cent for the year. In the personal products segment, revenues rose by almost 9 per cent but the PBIT for the segment rose by 6.7 per cent. The oral care segment remained under competitive pressure.
While the results were on expected lines, experts feel that there would be a few challenges going forward. “Key challenges for HUL will be volume growth, consumer demand, competitive intensity and Fair & Lovely skin care business plan. Operating margins are flat, elevated competitive intensity in oral care would keep advertising and promotion spends high,” said Rahul Shah, VP, equity advisory group, Motilal Oswal Securities.
