* First quarter profit doubles on one-off property sale
* CFO warns on possible impact of already deficient monsoon
* Inflation, currency volatility remain challenging
By Nandita Bose
MUMBAI, July 23 Hindustan Unilever Ltd (HUL)
, India's largest consumer goods maker, warned of
challenges from a deficient monsoon, persistent inflation and
currency volatility when it reported a doubling of quarterly
profit on Monday.
"We have to watch out for the impact of the monsoon and wait
for this quarter to play out," R. Sridhar, chief financial
India has cut monsoon rains expectation to below average.
"Initial reports suggest that the monsoon has been deficient
and that will most certainly have an impact on the overall
economy, rural markets and price of food products ... we will
have to wait and see what impact it has on demand for consumer
goods," Sridhar said.
Deficient monsoons hurt rural purchasing power, as India is
largely dependent on its annual monsoon rains for crop growth.
The Indian unit of Anglo-Dutch conglomerate Unilever Plc
said its net profit rose to 13.3 billion
rupees ($240.88 million) for the fiscal first quarter ending
June 30, from 6.3 billion a year earlier, after an exceptional
gain of 6.05 billion from property sales.
Net sales for the quarter rose 14 percent to 62.5 billion
rupees, with 9 percent underlying volume growth.
Analysts on average had estimated a profit of 6.94 billion
rupees on sales of 63.08 billion, Thomson Reuters Starmine
"On a comparable basis it is slightly better than
expected...the volume growth has been strong and that is one
encouraging number to take with us into a very uncertain time
ahead ," said Naveen Trivedi, an analyst with PINC Research.
Indian consumer goods makers face a difficult choice between
raising prices and retaining market share as inflation in home,
personal care and food segments, as well as weak consumer
sentiment pinch margins and price increases hurt volume growth.
HUL's operating margins in the quarter rose 180 basis points
from a year ago, with its operating profit rising 30 percent.
Sales at the home and personal care segment grew 21 percent,
while its foods business grew 11 percent.
"The packaged foods business did well although there has
been a slowdown in our beverages portfolio with mass segment tea
brands not performing very well," Sridhar said.
HUL, which the market values at $17.5 billion, makes popular
brands such as skin fairness cream Fair and Lovely, Clinic Plus
shampoo, and soap brands such as Dove.
Shares in the company, which have risen just 9 percent since
the start of 2012 compared with a 21 percent rise in the BSE
FMCG index, ended 0.69 percent lower on Monday, in a
weak Mumbai market which closed before the results came out.
The company trades at 26.5 times its 12-month forward
earnings, compared with 15.1 times for ITC Ltd, 30.9
times for Nestle, 21.6 times for Godrej Consumer, Thomson
Reuters Starmine Smart Estimate showed.