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HUL Volume Growth Slows, Shares Fall

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Slackening volume growth and leaner margins at Hindustan Unilever, India's largest household products and consumer goods maker, send its shares down 1 per cent on Thursday after quarterly profit beat estimates thanks to a one-time gain.

The maker of brands such as Dove soap, Clinic shampoo and Closeup toothpaste said competitive pressure would remain strong and high raw material costs were unlikely to ease.

"Commodity inflation continued to remain high across our key raw materials such as palm oil, crude and coffee," Chief Financial Officer R. Sridhar said in an earnings conference call.

"As we look ahead the FMCG market will continue to grow," he said, referring to fast moving consumer goods. "However, input cost inflation will continue to remain high."

Demand for consumer goods in Asia's third-largest economy and the world's second-most populous nation, is expected to grow rapidly in the coming years from annual industry sales of $76 billion now as incomes rise.

The company, the Indian arm of Anglo-Dutch conglomerate Unilever Plc, said net profit rose 18 percent to 6.27 billion rupees ($142 million) for the fiscal first quarter ended June from 5.33 billion rupees a year ago.

The earnings were above a Thomson Reuters I/B/E/S consensus forecast of 6.02 billion rupees and were boosted a one-off gain of 587.5 million rupees from sale of properties, long-term investments and dilution of stake in a unit.

Raw material costs climbed 26 percent and the company had to battle hard against rivals such as the Indian units of Procter & Gamble and Colgate-Palmolive, lowering its operating profit margins by 40 basis points.

"Competitive intensity is going to remain high going forward. It is highest in the hair care and oral care categories for us," Sridhar said.

Net sales of the firm, which the market values at $15.95 billion, grew to 55.03 million rupees, just above a Reuters forecast of 54.5 billion rupees.

"The sales have beaten street forecasts but the market is not enthused because volume growth has fallen to single digit in from double-digit growth in past several quarters," Himani Singh, an analyst with Elara Securities, said.

Sales at the home and personal care segment, which makes soaps, creams and shampoos and its foods business grew 15 percent respectively.

Shares in Hindustan Lever were down 1 percent at 322.85 rupees in a subdued Mumbai market, trimming gains for the year-to-date to 4 percent.

(Reuters)


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