Consumer goods giant Hindustan Unilever on Friday reported over 17 per cent rise in net profit at Rs 807 crore for the quarter ended September on the back of higher soaps and detergents sales .
The company had posted net profit of Rs 688.92 crore in the same period of 2011-12.
Its net sales rose to Rs 6,155.41 crore in second quarter, as against Rs 5,516 crore in the year-ago period.
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"The company continued to focus on innovations during the quarter. In medium-to long-term, the market potential remains positive. However, in the short-term, the market environment is challenging. We are also aware that there is inflationary pressure," HUL Chairman Harish Manwani said while announcing the earnings.
A steep 83 per cent spike in other income to Rs 148 crore aided the overall improvement in the profit.
The soaps and detergents segment grew 22.5 per cent during the quarter, while personal products segment rose 12 per cent led by hair and oral care products.
Beverages grew by 10 per cent, led by premium tea and coffee, and the packaged foods business also saw an equal amount of growth, he said.
However, the market was disappointed and pulled down HUL scrips by 3.27 per cent to Rs 551.75 on the BSE whose main index Sensex shed 133 points in a dull trading.
In a note, Motilal Oswal Securities vice-president for markets strategy and equities Rikesh Parikh said volume growth moderation, mainly the significant slowdown in the CSD segment is a cause of real concern going forward.
But he noted that overall margins have been maintained largely due to price hikes. The brokerage said it is neutral on the HUL counter largely due to rich valuation.
Gross margin expanded 180 basis points to 48.2 per cent and the net margins expanded 74 bps to 15.5 per cent while ad-spend rose 60 bps year-on-year to 12.2 per cent but down quarter-on-quarter. He also said the rise in net was also helped by a steep 83 per cent increase in other income which rose to Rs 148 crore.
During the quarter soaps and detergent sales grew 22.5 per cent pushing up margins by 190 bps to 14.3 per cent.
The company, Manwani said, continued to focus on innovations during the quarter and introduced hair care product like TRESemme.
On volumes growth Manwani said, "At this stage there is no reason to believe that the markets are reaching a stage where we are going to grow from growth to no growth...what will happen is some category will grow faster and some slower.
That's the reality with any developing market especially ours... there is no need to suspect the boom and bust cycle."
However, he admitted that some of the discretionary categories are showing moderation such as packaged foods, personal care etc. "But, in the medium- to long-term we are extremely positive, he added."
The company has declared an interim dividend of Rs 4.5 per share for the full year ending March, apart from an additional Rs 8 special dividend, he said.