* HUL to further cut soap, skincare prices to fend off
* Smaller domestic firms with cheaper products attracting
* Sales growth seen subdued in near-term
By Nandita Bose
MUMBAI, April 29 Hindustan Unilever Ltd
will intensify a price war against lesser-known detergent and
skincare brands this year as it seeks to win back India's
increasingly thrifty shoppers and reverse four consecutive
quarters of slowing sales.
HUL, India's largest consumer goods maker, has already cut
prices of some soaps and detergents by 15-18 percent over the
past month to fight off competition from smaller domestic rivals
like Rohit Surfactants, Bharti Soap Works and skincare firm Ayur
The Indian unit of Anglo-Dutch conglomerate Unilever Plc
will likely deepen such discounts this year to
remain competitive and revive sales growth, Chief Financial
Officer R. Sridhar said during an earnings conference call. He
gave no further details.
"It will be a tough year for big companies like HUL," said
G. Chokkalingam, chief investment officer at Centrum Wealth
Management, who has a hold rating on the consumer goods sector.
"Most will have to spend heavily on promotional activity more
than ever to retain and regain market share," he added.
High inflation, meagre urban salary raises and drought in
the agricultural heartland reduced incomes in Asia's
third-largest economy last year and heated up the competition in
the $13 billion consumer goods sector.
HUL, which manufactures detergent brand Rin, Dove soap and
Fair and Lovely skin creams, posted on Monday a
better-than-expected 15 percent increase in net profit for the
fiscal fourth quarter ending March 31 as lower raw material
costs boosted margins.
Net profit was 7.87 billion rupees ($144.7 million) for the
fiscal fourth quarter ended March 31, from 6.87 billion rupees a
Analysts on average had estimated a profit of 7.6 billion
rupees on sales of 64.2 billion, Thomson Reuters Starmine
Estimates showed. Net sales for the quarter were 13 percent
higher at 63.6 billion rupees while net profits were at 7.8
Sales volumes for the quarter, however, grew a more
conservative 6 percent, slightly higher than analysts'
expectations of 5-5.5 percent growth.
"The stress on volumes will continue for at least the next
two quarters after which there might be a revival," said Phani
Shekhar, fund manager, portfolio management services at Angel
Broking. "We may see consumers switch to low price point
products during this time, especially in soaps and detergents."
HUL, India's 13th-largest listed company with a $18.6
billion market capitalisation, posted operating margins of 15.02
percent this quarter, up from 14.05 percent a year ago.
Sales at the home and personal care segment grew 12.7
percent, while its food business grew 15.1 percent. These
segments have been hit due to the dip in consumer demand.
HUL shares, which have fallen 11 percent since the start of
2013 compared with a 3 percent rise in the consumer sector's
benchmark BSE FMCG index, rose as much as 6 percent
after the results on Monday.
The company trades at 28.8 times its 12-month forward
earnings, compared with 28.4 times for ITC Ltd, 34.7
times for Nestle and 34.6 times for Godrej Consumer, Thomson
Reuters Starmine Smart Estimate showed