Hindustan Unilever Limited (HUL), the fast moving consumer goods (FMCG) major on Tuesday announced a drop of 2 per cent in its net profit for the third quarter of 2010-11 ended December 2010 at Rs.637.50 crore against Rs.649.11 crore, mainly due to high input costs. However, with sustained double-digit underlying volume growth in the domestic consumer business of 13 per cent, HUL's total income for the third quarter was up 12 per cent at Rs.5,127.70 crore against Rs.4,573.23 crore.
During the quarter, input cost inflation continued to rise and the cost of goods sold went up by 220 basis points to Rs.730.64 crore from Rs.602.33 crore as a result of steep rise in material costs, especially in commodity-sensitive categories. Advertising and promotion (A&P) spend grew 17.44 per cent to Rs.743.26 crore (Rs.632.88 crore) while other expenditure were up 16.71 per cent at Rs.859.27 crore (Rs.736.25 crore).
As a result, operating margins were lower by 320 basis points. Buying efficiencies and cost saving programmes remain a priority and are being further scaled up. Financial income increased by Rs.38 crore through further improvement in working capital and sound treasury management.
The company said its home and personal care business grew by 11.6 per cent with jump in both laundry and personal wash. Personal products grew strongly at 20 per cent, growth was broad-based across categories with skin care delivering a particularly strong performance.
HUL's foods business grew 11.3 per cent with tea, coffee, noodles and ice-cream segments contributing strongly. Pureit continued to expand its franchise with product offerings across multiple price and benefit positions. Overall, the water business grew strongly and in line with action standards, the company said.
In a statement, Harish Manwani, Chairman said, “Our strategy is working and is reflected in the consistent double digit underlying volume growth over the last four quarters and ahead of market growth. We continue to strengthen our leadership in core categories, even as we invest to build opportunities for the future. In an inflationary environment, we will manage our business dynamically, through judicious pricing actions and increased focus on cost effectiveness, while ensuring that we remain competitive in the market place.”
