A sharp rise in commodity costs through last year has cast a
cloud over fast-moving consumer goods (FMCG) makers even as they
sought to shrug off the effects via price increases and reduced
package sizes.
The Indian unit of UK consumer giant Unilever reported a
nearly 11% jump in expenses to 117.08 billion rupees ($1.43
billion) for the quarter ended March 31, with gross margin
dipping to 48% from 49% a year earlier.
"The decline is basically a reflection of two years of
cumulative inflation that commodities have seen," Chief
Financial Officer Ritesh Tiwari said in a conference call with
media.
The margin decline came as growth in product prices slowed
to its lowest in more than a year to 7%, while sales volumes
expanded 4%, down from 5% at the end of December. Still, the
price increase and volume expansion drove the sale of products
11% higher to 146.38 billion rupees.
The price growth "will tail-off further," the company said
in a presentation. HUL has already lowered prices of its soaps,
detergents and tea as prices of some raw materials eased, which
it believes will drive the gross margin higher in the quarters
ahead.
It also expects volumes to pick up on the back of selective
price cuts.
The Dove soapmaker's profit rose about 10% to 25.52 billion
rupees in the quarter that ended March. Revenue from its top two
businesses - home care as well as beauty and personal care -
climbed 19 and 10%, respectively.
HUL shares fell about 2%, taking their total declines this
year to nearly 4%.
Parent Unilever, meanwhile, smashed quarterly sales
forecasts on higher prices but said price increases would step
down from here.
($1 = 81.6900 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai; Editing by Savio
D'Souza and Dhanya Ann Thoppil)
(Adds details on price cuts, background; Updates shares)
By Praveen Paramasivam
CHENNAI, April 27 (Reuters) - India's Hindustan Unilever on Thursday reported a drop in fourth-quarter earnings
margin after increased commodity costs overshadowed sales
growth.
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