HLL disappoints with 32 pc fall in net profit

The bad news continues for beleaguered Hindustan Lever Ltd (HLL). Disappointing investors, the foods and soaps major today announced a highe...

The bad news continues for beleaguered Hindustan Lever Ltd (HLL). Disappointing investors, the foods and soaps major today announced a higher-than-estimated fall of 32.6 per cent in net profit — to Rs 334 crore from Rs 494 crore in the same period of last year — for the quarter ended December 2004.

HLL’s net sales were flat at Rs 2,600 crore as compared to Rs 2,583 crore recorded last year. Its net profit — before considering exceptional items — for the same quarter was down 36 per cent to Rs 357 crore from Rs 562 crore.

The fall in profit was steeper than market estimates of a 20-25 per cent decline.

For the entire 2004, HLL’s net sales were down marginally at Rs 9,926 crore (Rs 10,138 crore), while its net profit was down by 32 per cent to Rs 1,197 crore from Rs 1,771 crore.

Says HLL chairman M S Banga, who is to soon move to London as part of a major Unilever recast: “The FMCG market has started to revive after two years of decline. This augurs well for us and in 2005, we will resolutely focus on growing our topline. The rising input costs are a cause for concern though, we are confident of mitigating its impact through aggressive cost savings and judicious price increases.”

The board proposed a final dividend of Rs 2.50 per equity share of Re 1 each. This, along with the interim dividend of Rs 2.50 per equity share, amounts to a total dividend of Rs 5 per equity share for 2004.

‘‘The agenda for this year is to drive for topline growth and market share growth. We plan to grow our brands in terms of future market trends,’’ said Banga.

	How the FMCG gaint fared

	• Sales flat in the fourth quarter • HLL stock rises 0.84% to Rs 155.30 on the BSE • FMCG sector reviving, next quarter could be better • Confectionary business sold off • Water to be next growth driver Story continues below this ad

On its new business initiatives, Banga said: ‘‘We see home water consumption as a huge market and it offers a huge business in times to come. More than 90 per cent of the water market rests in that segment.’’

During December quarter, HPC sales grew by 3.4 per cent while foods declined by 8.5 per cent, over sales grew only by 0.7 per cent.

Processed food market shares “improved or held” although primary sales declined by 42 per cent, he said, adding, “this decline and consequential impact on results is due to phased trade stock reduction in salt and culinary products, de-focussing of ‘atta’ in unviable geographies.”

Says Banga: “Despite continuing intense competition, we have strengthened our leadership position specially in hair and laundry. This has been achieved through strategic brand investments backed by innovation and activation. In beverages our focus on Brooke Bond and Lipton has started delivering results.”

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In foods, HLL completed its restructuring and the portfolio is now focused for growth. The company’s total expenditure rose by 10.52 per cent on a quarter to quarter basis to Rs 2,180.91 crore against Rs 1,973.20 crore. The company’s advertising and promotion spend rose 4.43 per cent to Rs 177.27 crore against Rs 169.74 per cent in the previous quarter.