Fast-moving consumer goods (FMCG) major Hindustan Lever on Thursday announced a 22.99 per cent decline in net profit for the first quarter ended March 31, 2004, to Rs 294.88 crore from Rs 382.92 crore crore in the corresponding quarter of the previous year.
This is Hindustan Lever’s lowest-ever net profit growth in the last 21 quarters. The 22.99 per cent drop in net profit for the quarter is the worst fall in the quarterly net profit numbers of Hindustan Lever ever since companies started publishing quarterly financial results from the quarter ended March 1998.
The Hindustan Lever scrip lost 0.62 per cent to a near-11 month low of Rs 143.95 at close, after hitting an intra-day low of Rs 139. Profit after tax but before exceptional items declined 20.9 per cent to Rs 302.91 crore from Rs 382.92 crore in the corresponding period of the previous year.
Operating profit (profit before interest and tax) for the March quarter declined 13.7 per cent mainly because of the price corrections in detergents and shampoos.
Profit before tax declined 25.8 per cent to Rs 370 crore owing to lower treasury income and the interest (Rs 29.64 crore in March quarter) on bonus debentures.
Net sales for the quarter fell 0.74 per cent to Rs 2,353.34 crore from Rs 2,370.93 crore in the quarter ended March 31, 2003.
However, Hindustan Lever’s domestic fast moving consumer goods business and continuing business grew 3 per cent to Rs 1,982.75 crore and Rs 2,353.34 crore, respectively.
Hindustan Lever chairman M S Banga said: “Our business is now totally focused. The Indian market opportunity is huge and we will leverage our strengths and powerful brands to drive growth. The company will be focusing on the profitable growth of its 35 power brands.”
On the recent price cuts by its rivals as well as on the competitive market scenario, Banga said, “We will not hesitate to make financial commitments to defend and strengthen our market position in the face of competition. We will create long-term value for shareholders by driving profitable growth across all our categories.”
According to the chairman, fast moving consumer goods currently account for 4 per cent of household expenditure and the recent stagnation in the sector is due consumers switching their spending to automobiles and housing where interest rates are lower.
“Brilliant marketing is the key to re-establishing growth in fast moving consumer goods brands,” Banga pointed out.
In the fast moving consumer goods business, Hindustan Lever’s home and personal care business grew 7 per cent in volume terms and 3.5 per cent in value terms.
Its foods business saw a growth of 1.4 per cent for the first quarter of this year. Exports declined to Rs 311.24 crore in the March quarter, and profitability was impacted by the rupee’s appreciation and anti-dumping issues in marine products.