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September, 2006 Pragati Maidan, New Delhi, India |
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Health And Beauty Keep HLL In Shape
Hindustan Lever’s sales and profit growth in the third quarter ended September ’04 may have been disappointing, but its segmental performance reveals that profit margins in two divisions – health and personal care products – have gone up a little compared to the corresponding quarter previous year. Overall, its operating profit margin (OPM) has fallen about 500 bps to 14.1% as a result of the ongoing price war in detergents and shampoos and oral care.
The company’s segment profit margin in soaps and detergents in September ’04 was 14.8%, compared to 14.5% in the June ’04 quarter, while personal products’ margin improved to 33.3%. HLL’s management played down the margin improvement saying growth was marginal and not to be assumed as a trend that will continue.
Apart from these two categories, margin in the beverages segment improved to 20% from 16% in September ’03. Processed foods reported a dismal performance with losses of Rs 130 million compared to a loss of Rs 47 million in the same quarter last year (in continuing businesses). On the sales front, soaps and detergents grew 3.8% in the September ’04 quarter, compared to a 2.9% decline in the June quarter. Fabric wash sales this quarter compared to a fall in the previous quarter. In the personal wash category, HLL’s market share has declined since Mar ’04, and in the Sept ’04 quarter volume growth was up. The management attributes a falling market share in Lux as the main reason for the decline and expects share to recover with its re-launch. In personal products, sales were flat compared to a 5% growth in the June ’04 quarter.
Beverages’ top line declined by about 1% but this is attributed to the phasing out of tail brands in the tea business, primarily A1. Despite Brooke Bond’s sales growth was flat. Even as margins have been poor, sales growth of continuing processed foods declines 38% to Rs 610 million.
Date: 29-Oct-2004
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