Hindustan Unilever Beats Estimates on Cosmetics Demand

Hindustan Unilever Ltd., the Indian unit of the world’s second-biggest consumer-goods company, reported second-quarter profit that beat analysts’ estimates as sales of skin creams and cosmetics climbed.

Net income rose 13 percent to 9.1 billion rupees ($148 million) in the three months to the end of September from 8.1 billion rupees a year earlier, the Mumbai-based company said in a statement today. Profit exceeded the 8.6 billion-rupee median of 34 analysts’ estimates compiled by Bloomberg.

The maker of Dove moisturizing cream and Surf Excel laundry detergent was helped by a “huge step-up” in advertising spending and consumers stocking up on cold creams before winter, Chief Financial Officer Sridhar Ramamurthy told reporters in Mumbai. Demand for the company’s premium hair care products and packaged foods in India “still remains under pressure,” he said.

“Considering the economic environment, the growth in personal products is OK and the results are more or less up to the market’s expectations,” Nitin Mathur, an analyst at Espirito Santo Securities, said in an interview. “It remains to be seen how long they can sustain these heavy advertising expenses to grow sales.”

The company spent 9.54 billion rupees on advertising and promotions, 24 percent more than the same period last year, according to the statement.

Revenue Gain

Hindustan Unilever fell 2.6 percent to 593.95 rupees in Mumbai trading yesterday. The stock has gained 13 percent this year, compared with a 16 percent climb in the 11-company S&P BSE FMCG Index of the nation’s biggest consumer goods companies.

Revenue at the company’s personal products unit, which includes its Dove and Vaseline skin creams, increased 12 percent to 19.5 billion rupees.

Sales volume at the company rose five percent, compared with 7 percent in the same period last year. That metric reflects sales growth excluding price changes.

“Volume growth remains dismal and suggests the economic environment is still very weak,” Mathur said.

Parent Unilever this week reported the slowest quarterly sales growth in four years as demand for its soaps and spreads slowed in emerging markets and failed to pick up in North America and Europe amid higher levels of competition.

The food-price inflation in India and the decline in emerging-market currencies affected Unilever and “we’re obviously working our way through that,” Chief Executive Officer Paul Polman said on an Oct. 24 conference call.

Sales at Hindustan Unilever climbed 9.6 percent to 67.5 billion rupees in the second quarter. Parent Unilever’s emerging markets business grew 5.9 percent in the same period, Chief Financial Officer Jean-Marc Huet said Oct 24. The company did not disclose the Indian unit’s exact contribution to the parent.

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