In what sends out a positive signal that growth in the fast-moving consumer goods (FMCG) industry has sustained its momentum, notwithstanding the slowdown in GDP and a poor start to the monsoon, Hindustan Unilever's (HUL's) net profit has more than doubled to Rs 1,331 crore in the first quarter ended June 30, 2012.
While the jump of 112% in net profit is on account of an exceptional income of Rs 607 crore arising from the sale of properties, and is thus not strictly comparable with that of the previous year, even on a like-for-like basis, net profit (before exceptional items) clocked a healthy growth of 48% to Rs 855 crore as against Rs 578 crore in the corresponding quarter last year.
What further strengthened the view on the growth momentum is that net sales of the FMCG major grew 14% to Rs 6,250 crore from Rs 5,496 crore during the period, bolstered by double-digit growth in both home and personal care (HPC) and foods segments. During the quarter, the domestic consumer business grew at 19% with underlying volume growth of 9%.
Operating profit (profit from operations before other income, finance costs and exceptional items) for the quarter was Rs 909 crore, a growth of 30% over Rs 698 crore last year. HUL's CFO R Sridhar ruled out any visible slowdown in rural and urban markets, while adding that these markets have been growing in double digits according to Nielsen. However, experts believe that the impact of a poor monsoon could come with a lag effect.
More than 40% of HUL's products are consumed in rural India. Prior to the results, at the company's 79th AGM here on Monday, HUL's chairman Harish Manwani spoke about the growth opportunity in rural India and how it is becoming the epicenter of India's growth story.
"It is often said that there are two Indias — Bharat which exists in the villages and India which thrives in the urban areas. If our country has to have real progress, these two Indias must converge. Prosperity will have to come to our villages, towns and cities." Later, commenting on the company's performance, Manwani said, "We have delivered another quarter of strong volume led growth with an improvement in margins.
We continue to drive innovation and execution to strengthen our core business while leading market development in the emerging categories." The company said inflationary pressures during the quarter came primarily from currency depreciation.
However, HUL managed the cost pressures through judicious pricing coupled with focus on buying efficiencies and cost savings. HUL's laundry business sustained its growth trajectory with all brands growing in double digits across formats.
Continued focus on upgradation saw the premium segment perform well with both Surf and Rin delivering double-digit volume growth. Skin cleansing witnessed double-digit growth. In skin care, Fair & Lovely, Ponds and Lakme grew in double digits, while hair delivered double-digit growth across formats. In oral care too, growth was stepped up to double digits.