HLL’s advertising and promotions costs rise by 50%

HLL’s advertising and promotions costs rise by 50%

Author | Source: The Economic Times | Wednesday, Feb 15,2006 8:26 AM

HLL’s advertising and promotions costs rise by 50%

Lever's profit, both for the quarter and for the full year, includes extraordinary items of Rs 82.4 crore and Rs 53.6 crore, largely due to the profit on transfer of the Doom Dooma plantation business to its subsidiaries. Including this, net profit for the quarter rose 56% to Rs 520.8 crore and 17.6% to Rs 1,408.1 crore.

Lever officials expressed considerable satisfaction over the performance, but said that pricing and margin pressures continue to remain. “There is still pressure on margins in categories like fabric wash and there is always the issue of cost escalation driven by fuel price increases,” said finance director D Sundaram. “We will manage these with a cost-effectiveness programme, a richer product mix and judicious price increases,” he added.

During the quarter, advertising and promotions cost grew 49.6% to Rs 265.4 crore. This cost could rise further, with increased competition and entry of new players like ITC into the soaps and detergents business.

A continuing worry for Lever would be margins in the soaps and detergents business. Despite higher sales, the profit before tax for this business fell 11.8% to Rs 203.5 crore in the fourth quarter and by 11.7% to Rs 683.7 crore for the full year.

Operating margins in the business fared even worse falling to 15.7% from 20.1% in the year-ago quarter. Increased competition in the current year is unlikely to bode well for margins in this business.

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