HLL profit rises 22.42%, sales growth slows down

HLL profit rises 22.42%, sales growth slows down
ENS ECONOMIC BUREAU

MUMBAI, FEB 15: Though fast moving consumer goods giant Hindustan Lever's profit has shown a growth of 22.42 per cent to Rs 1,310 crore in the year ended December 2000 as compared to Rs 1,070 crore in 1999, its net sales moved up only marginally by 4.5 per cent to Rs 10,604 crore as compared to Rs 10,142 crore recorded in the previous fiscal.

The board has also recommended final dividend of Rs two per share having a face value of Re one. The total dividend for the financial year 2000 was Rs 3.50 per share including an interim dividend of Rs 1.50 per share as announced earlier.

The HLL scrip, which accounts for 13.9 per cent of the benchmark Sensex, rose as high as Rs 222.65 after the company announced its results shortly after mid-day. The scrip finally closed at Rs 218 while the BSE Sensex closed up by 1.21 per cent.

Addressing a news conference, HLL chairman M S Banga said the results reflected focus on profit growth through improving product mix, cost optimiation initiatives, outgoing cost effectiveness programmes and continuous thrust on supply chain efficiencies. ``The focus of the company now will be on to focus on 30 main brands, reduce costs and improve quality of its products,'' Banga said.

Banga promised better performance in 2001, though he offered no specific targets. "I am not happy with a 4.5 per cent growth. We will continue to expand business from our premium products in 2001 and attack slow growth in other areas," he said.

A major reason for the slowdown in profit growth was the fall in sales of Lifebuoy soap, one of Lever's biggest brands. Competition from low-cost producers hurt Lifebuoy and dragged the market share by value of Lever's soap business to 59.1 per cent in 2000 from 62.7 per cent in the previous year. Banga said reversing that trend was a priority in 2001.

The growth in operating margins in 1999 was mainly due to strong growth in premium products, driving down the costs and tight control over fixed overhead costs, he added. ``There is still scope for further cut in fixed and supply chain costs,'' Banga said.

Exports turnover of HLL and its subsidiaries increased to Rs 1,917 crore compared to Rs 1,803 crore. Premium portfolio in personal wash recorded a growth of 16 per cent, fabric wash by seven per cent, premium powders by 19 per cent and household care business grew by a healthy 22 per cent. ``The two year declining trend in tea was reversed and sales were up by five per cent,'' Banga said.

As the market place was today flooded with consumer goods, HLL would now prune its brand portfolio of 110 brands to only 30 brands and examine all variants and market them only those which would be needed.

These brands -- 12 from foods and rest from the personal health care -- have been chosen to start the new strategy which will contribute 75 per cent of the FMCG turnover for the company. These will be selected on the basis of absolute size in the particular market segment, brand strength, competitive positioning and the future growth potential for the slected brands.

``We are going to put our resources, realign the brands and add value as part of our plans for these power brands, which have been chosen based on their size, competition and strength,'' HLL chairman said.

Banga said HLL was also adding value to the services, like increasing the number of beauty saloons from 15 to 60 this year and increasing ice cream parlours from around four to 20 in 2001. HLL, which is 51 percent owned by Anglo-Dutch consumer products firm Unilever, said last year it was considering entering nine new business areas to achieve a target of doubling turnover every four years.

Banga said Hindustan Lever had now conducted feasibility studies for all nine. "We have shortlisted some of those and we are currently experimenting with different entry models in five of those areas," he said, adding decisions would be made this year. The prospective areas are confectionary, water, healthcare, direct-to-consumer distribution and rural penetration, Banga said.

Lever may decide to enter some areas through acquisitions, Banga also said. "We are considering all options. It could be partnership, direct entry or acquisitions," he added. On a qualitative restrictions regime coming in place, he said "HLL had been benchmarking its products with the parent company and upgrading our products to world quality."