The first half of 1999 ended June 30, reflected a 24.55 per cent growth in net profit to Rs 439.62 crore as against Rs 352.96 crore in the same period last year. Despite difficult trading conditions, HLL achieved a growth of 10.79 per cent in second quarter turnover to Rs 2,752.78 crore as against Rs 2,484.53 crore in the corresponding period of 1998.

The board of directors in its meeting on Monday, resolved to pay an interim dividend of Rs 12 per share. In the previous period, the interim dividend was Rs 9.60 per share.

First half net sales witnessed a 7.17 per cent growth to Rs 5,193.72 crore compared to Rs 4,846.01 crore last year. Sales growth has been maintained on the back of a 10 per cent plus growth indetergents and an over 20 per cent growth in personal products--the main growth drivers of the company.

Besides, cost savings across business categories like cost control, supply chain management and operational efficiencies have helped the company significantly, the company has said.

Says HLL chairman KB Dadiseth who is upbeat on the rural demand: ``While a lot depends on the rural demand and the monsoons, we are witnessing a definite upliftment in demand from the rural market. We expect the rural market to deliver results even as the urban demand becomes less buoyant.'' The slowdown in urban demand has led to a slowdown in the demand for premium products, while lower end products have witnessed an upsurge in demand, said Dadiseth.

An increased thrust on rural distribution has enabled HLL to achieve reasonable volumes growth in difficult trading conditions. Further, while the domestic home and personal care business comprising soaps, detergents and personal products grew on a double-digit note of 13.6per cent during the second quarter, the foods category of culinary, ice-cream, coffee, branded staples, oils and fats grew at a marginal pace of 2.3 per cent due to lower commodity prices of oils and coffee which depressed realisations.

Rural India is said to have demonstrated a tremendous sign of purchasing power, said Dadiseth. As against a 65 per cent demand coming from the urban market six years back, the rural-urban tilt has shifted to over 50 per cent demand from rural market today, he said. ``It will accelerate in the same direction in favour of rural demand,'' Dadiseth said.

HLL has attempted to bring about a surge in rural demand through low-unit price packs of products, and is expected to continue with this strategy for future growth, analysts point out.

In view of the rapid changes and faster obsolence in information technology, the company has revised downwards, the estimated useful life of computers. Accordingly, the additional depreciation charged to the results of the quarter is Rs 13.20crore, of which only Rs 2.76 crore pertains to June quarter 1999, the company has said.

Other income has risen by 54 per cent in the second quarter and by 39 per cent in the first half of the year. Operating expenditure has gone up by 9.9 per cent in the second quarter and by 6.1 per cent in the first half.

Operating profit at Rs 314 crore in the second quarter of the current year, has increased by 23 per cent over the same period last year. Operating profit in the first half has risen by 17.8 per cent to Rs 540.45 crore from Rs 458.76 crore. Operating profit margins in the first half have climbed up to 10.40 per cent from 9.46 per cent, while net profit margins have improved to 8.46 per cent from 7.28 per cent.

Earnings per share on an annualised basis stands at Rs 40.04, based on the half yearly results, which represents a 24.6 per cent growth over Rs 32.15 per share for the same period last year. Return on networth has increased by 47.3 per cent in the first half of the year.

Capital expenditure ofaround Rs 100 crore is mainly on the aquisition of Lakme's Kandla factory, expansion of soaps and detergents capacities, investment in IT infrastructure and investments in the cold chain setup.

HLL has increased market share across all categories. In soaps, HLL has upped its share to 63.9 per cent from 61.7 per cent, while in detergents, the share has gone up to 38.9 per cent from 37.3 per cent. The multinational's shampoo share has increased to 69.4 per cent from 59.8 per cent. It's share in packet tea has, however, declined to 41.6 per cent from 47 per cent.

While packet tea is on a recovery path, after having suffered a market share loss following the eight per cent excise duty which has now been withdrawn, the company continues to suffer due to difficult trading conditions. Exports to Russia have been impacted largely in the home and personal care category rather than on beverages, said Dadiseth. ``We are not optimistic on the future growth untill the situation in Russia improves. However, in totalitythe impact is not significant. It is a couple of hundred crores for a full year,'' he added.

On the difficult trading situation, Dadiseth said that there is a definite slackness in the international trade. ``Ours is a business which does not sink totally when the economy is in a bad shape, while on the other hand it does not pick up dramatically when the economy is looking up,'' he said.

On the huge growth potential in foods, Dadiseth reiterated that the company has gained an insight into the supply chain and would bring in product innovations like ready-to-eat chappatis and whole wheat atta, etc to name a few.

INSIGHT

Next quarter will be better

Hindustan Lever's growth is more or less within the markets expectation. Besides the warning on incremental revenues the mood at the company is otherwise buoyant. The only blemish on an otherwise good performance is the fact that one-third of the incremental profit before tax has come from an increase in other income. Net of that incrementalincome the growth in PBT is just 13.5 per cent against the 21 per cent growth reported. This is a minor cause for concern, though the company has maintained its topline growth rates. However, with rural income increasing demand, and with the removal of excise on packet tea, HLL's third quarter results should be better. The interim dividend has contributed in perking up the stock.

-- Aaron Chaze