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Company¶s operating profit margin improved by 20 basis points to 17.2%, compared with
the year-ago quarter

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Consumer care and household products maker Hindustan
Unilever Ltd (HUL) is finally regaining volume growth in its soap
and detergent categories. And the impact on its margins has not
been very drastic, due to lower input costs, lower employee costs
and a good performance from its personal products division. HUL¶s operating profit margin improved
by 20 basis points to 17.2%, compared with the year-ago quarter. One basis point is one-hundredth
of a percentage point.|

But volume growth is the highlight of this quarter. HUL¶s overall volume grew by 4.6%, compared with
1% in the September quarter and 2% in the June quarter. The firm has not given category-specific
volume growth, but said that volume shares in soaps and detergents have risen over the September
quarter. Some credit must go to a low base too and this effect will be
visible till mid-fiscal 2011.

Graphic: Yogesh Kumar / Mint

Soap and detergent segments¶ sales fell by 2.4% to Rs2,072 crore and
profits declined by around 21%. Lower detergent prices, downtrading in
detergents, higher ad spending and a high base effect are the key reasons
for the decline. However, sales and profits are higher on a sequential
basis, indicating some stability in performance.

But HUL¶s second warhorse, personal products, came to the rescue. Sales
rose by 15% and profits by 12.4%. Soaps and detergents contributed
nearly half of sales. Personal products¶ share was around 30% but its
share of profits was much higher at 56%. Beverage sales were higher by 8% and would have been
higher but for downtrading in tea.

HUL¶s advertising expense grew 66%, part of its strategy to win back share and volume growth.
Margins improved due to a 4.7% drop in input costs and a 4% fall in employee costs. Profit before tax
and exceptional items rose by 3% to Rs781 crore. After its initial success, HUL has to show it can
sustain volume growth and margins. A rise in input costs and competitive pressures in personal
products will be key concerns. Its performance is the first good news for investors after a few dismal
quarters; the stock declined only 1.7% on a day when the market fell by 3%.


 
 



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