HLL posts 8.7 pc sales growth in Q2

Bangalore, July 30: Amidst mounting transportation costs due to high oil prices, fast moving consumer goods leader Hindustan Lever Ltd (HLL) posted an 8.7 per cent rise in its total sales in the quarter ending June, while the proceeds from FMCG business grew by a healthy 12.1 per cent.

The company posted a total sales of Rs 3,052.07 crore for the quarter, compared to Rs 2,818.92 during the corresponding period last year. The profit before interest and tax was Rs 409.39 crore, up from Rs 348.09 crore during the previous period and net profit at Rs 371.30 crore as against the previous figure of Rs 284.2 crore.

Announcing the second quarter results after holding the Board of Directors meeting outside its Mumbai headquarters here today, HLL Chairman Harish Manwani said ''We continue to be encouraged by the growth of our markets, particularly with rural markets gaining momentum. We remain focused on driving cost efficiencies and in appropriately investing behind our brands. Cost inflation on the back of rising crude prices remains a challenge and is being rigorouosly addressed within the business.'' The Board announced an interim dividend of 300 per cent at Rs three per share of face value Re one for the year 2006. The dividend would be payable on August 22.

Net sales for the half year ending June was Rs 5,824.32 crore in comparison with Rs 5307.13 crore during the corresponding period last year. The profit before interest and tax grew to Rs 409.39 crore and net profit to Rs 807.20 crore. Mr Manwani said the growth in continuing businesses, after eliminating impact of disposals, maintained double figures at ten per cent.

He said HPC business continued its strong performance, leading to a 13.9 per cent growth, with all categories growing at double digits. Broadbased growth momentum was maintained. Innovations during the quarter included launch of Clinic All Clear Ice Cool variant, re-launch of Surf Excel, Pepsodent and Vim Liquid. The highly competitive laundry category continued to perform well both in the premium and popular segments, he added.

Mr Manwani said the shampoo segment was the best performer with Clinic and Sunsilk franchise recording good growth. Soaps too sold well, especially the Lux portfolio and the recently re-launched Lifebuoy range, while toothpaste maintained their growth momentum.

HLL's food business made a rather tardy growth of 3.9 per cent, with tea segment showing a six per cent decline in sales.

Clarifying on the negative growth, Mr Manwani said ''the tea market proved sluggish with zero per cent growth this year, while coffee segment continues to grow. We are working on the fall in the sales of tea and it's an important agenda in our point of view. It is not true to say that other corporates have marched ahead of us in the tea segment. Actually it is the local players who are making a dent in our sales. Similar trends are seen in other big brands too.'' He said cost saving initiatives as well as buying efficiencies mitigated the impact of escalating costs. These savings, together with selective price increases, improved the gross margin. A significant part of this margin increase was redeployed in supporting the brands for driving sales growth.

Mr Manwani said HLL saw good growth in rural market, which had kept pace with the growth of urban market. ''Under Project Shakti, launched by our company, we have reached 80,000 villages in the country. Efficient sales and growth component in rural sector is very good and we are satisfied with it.'' He said HLL was concentrating on innovation-led growth with a stress on core categories. ''The growth has come because of innovations in core categories and not just brand innovation. The process innovation is given importance to achieve cost effectiveness,'' he added.

Asked why HLL had not made much headway in modern trade, comprising super bazaars and self service stores, he said modern trade accounted for just three per cent of the total throughput of the FMCG market. The company was looking at specific cities to make inroads. National players always held an advantage in respect of modern trade than general trade.

On AMP, Mr Manwani said the company's long term strategy was to remain in competition and it would make investment only where it was really required. Cost appreciation, in the wake of oil price hikes, could put pressure on the pricing of the company's products, but it had an across-the-industry-effect and not just HLL.

He declined to react when asked whether HLL was trying to shift all its food-based industries from Bangalore to Mumbai.

Commenting on the beverage market, HLL CEO Boug Baillie said the company had maintained the growth and it was five per cent during the just concluded quarter.

On buyback of shares as contemplated, HLL Vice Chairman M K Sharma said the Board would exercise it at an appropriate time.

However, there was no such plan at present.

UNI