Hindustan Unilever Ltd. (HUVR), the Indian unit of the world’s second-largest consumer-goods company, reported first-quarter profit that exceeded analysts’ estimates after a one-time gain and increase in some product prices.
Net income doubled to 13.3 billion rupees ($237 million) in the three months ended June 30, from 6.27 billion rupees a year earlier, the Mumbai-based company said in a statement. The figure includes a one-time gain of 6.07 billion rupees, it said. The median of 25 analysts’ estimates compiled by Bloomberg was a 6.96 billion-rupee profit.
Chief Executive Officer Nitin Paranjpe raised some prices of soaps, detergents and personal-care products to offset higher raw material costs. The weakest monsoon rainfall in three years may constrain the company’s ability to boost prices further as declining farm output and rural income damp consumer demand in villages, according to Paras Bothra, head of research at Ashika Stock Broking Ltd.
“Some kind of margin pressure is going to be there because their strategy is going to be not to hamper volume growth,” Bothra said in a telephone interview from Kolkata. “They won’t be able to aggressively move up prices because purchasing power won’t be that strong in the rural areas for the next two quarters.”
Hindustan Unilever (ULVR)’s shares rose 7.5 percent to close at 476.20 rupees, the highest since Bloomberg started compiling data in 1991, and was the best performer on India’s benchmark Sensitive Index, which gained 0.2 percent.
Deficient rains during the monsoon season, which accounts for more than 70 percent of India’s annual rainfall, is delaying sowing of rice, oilseeds and lentils in several parts of the country, Agricultural Secretary Ashish Bahuguna said July 21. Hindustan Unilever has said more than 40 percent of its products are consumed in rural areas of the country.
Sales for the maker of Sunsilk shampoo and Knorr soup increased 14 percent to 62.5 billion rupees. The one-time gain includes proceeds from the sale of real estate.
Spending on advertising and promotions for the Indian unit of Unilever rose 30 percent to 8.2 billion rupees from a year earlier. Sales of the company’s soaps including Dove and detergents such as Surf increased 24 percent to 31.6 billion rupees, and personal care products rose 17 percent to 18.5 billion rupees.
Revenue of Hindustan Unilever’s packaged food such as Kissan ketchup increased 17 percent to 4.4 billion rupees.
“In the June quarter, you will see that pricing has contributed about half of the growth we have seen in our consumer business,” Chief Financial Officer Sridhar Ramamurthy said on a call with reporters. Prices of some of its home and personal care products were raised in the quarter, he said, without elaboration.
Parent Unilever is increasingly dependent on emerging markets such as India for growth. It got 41 percent of revenue last year from Asia and Africa, compared with 33 percent from the Americas and 26 percent from Europe, according to data compiled by Bloomberg.