Hindustan Unilever Rises as Profit Beats Estimates: Mumbai Mover

Hindustan Unilever Ltd., the Indian unit of the world’s second-biggest consumer-goods company, climbed the most in nine months in Mumbai trading after fourth-quarter profit beat analyst estimates.

Shares of Hindustan Unilever rose 7 percent, the biggest gain since July 2012, to 497.35 rupees at the close in Mumbai. It had the biggest percentage gain on the benchmark S&P BSE Index today.

Volume of local sales at Hindustan Unilever expanded 6 percent in the quarter, compared with a 5 percent pace in the three months ended December. The company is investing to strengthen its brands after sales expanded at the fastest pace in three quarters, Chairman Harish Manwani said.

“These results are good,” said Nitin Mathur, a Mumbai-based analyst at Espirito Santo Investment Bank. “The sales growth is tapering off but the margins are improving and that’s a good thing.”

Net income rose 15 percent to 7.87 billion rupees ($145 million) in the three months ended March, exceeding the 7.6 billion-rupee median of 33 analysts’ estimates compiled by Bloomberg.

The company lowered some soap prices in the quarter after raw material costs declined, according to Chief Financial Officer Sridhar Ramamurthy.

Material Costs

Prices of palm fatty acid distillate, an ingredient used to make soaps and detergents, had declined about 44 percent at the end of March from a year earlier, according to data compiled by Bloomberg. Spot contract rates for palm fatty acid distillate fell to $529.5 per ton in Malaysia as on March 29, the data shows.

Raw materials account for about half of the company’s costs, according to Sachin Bobade, an analyst at Brics Securities Ltd.

Sales at Hindustan Unilever, a unit of Unilever based in London and Rotterdam, rose 13 percent to 63.7 billion rupees in the fourth quarter from 56.6 billion rupees, it said in a statement today. That compared with the 63.9 billion-rupee median of 34 analysts’ estimates compiled by Bloomberg.

Demand is growing at a slower pace for “discretionary” products, Ramamurthy said on a conference call today. A pickup in demand is expected in the next two quarters, he said.

“In the short term, I think we are facing some challenges,” Ramamurthy said. “In the medium-to long-term, the prospects for the fast-moving consumer goods sector are certainly very good.”

The company’s sales in the soaps and detergents segment rose 13 percent, aided by its Dove, Lux and Lifebuoy brands. It cut some soap prices during the quarter, passing on lower commodity prices to consumers, according to the statement.

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