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Hindustan Unilever posts 19% jump in profit on lower costs

India's seller of Lux soaps and Lipton Tea saw margins rise

Hindustan Unilever's sales volume grew 12% in line with market expectations.   © Reuters

MUMBAI (NewsRise) -- Hindustan Unilever, India's biggest consumer goods maker, reported a more than 19% jump in first-quarter net profit, aided by strong expansion in sales volumes and lower costs.

For the three months ended in June, the Indian unit of the Anglo-Dutch Unilever reported a net income of 15.29 billion rupees ($223 million). Analysts were expecting the company to report a net profit of 15.4 billion rupees, according to a Bloomberg poll.

Revenue grew 2.9% to 93.56 billion rupees on the back of yet another quarter of double-digit volume expansion.

The company's sales volume, one of the most important metrics tracked by analysts, grew 12%, in line with market expectations for an expansion between 11% and 12%.

HUL, whose brands such as Lux soaps, Lipton Tea, and Dove shampoo are sold through thousands of mom-and-pop stores across the country, said it margins expanded 100 basis points thanks to lower cost of goods, even as it stepped up advertising and marketing to counter rising competition.

The strong performance was driven by "double digit volume growth across all three divisions and further improvement in margins," Sanjiv Mehta, chairman of HUL, said in a statement. The company continues to see strong improvement in demand from rural markets, which account for about 45% of its sales.

The profits were also helped by a lower base in the year-earlier period ahead of the roll out India's Goods and Services Tax. Retailers had reduced old stocks in a bid to avoid having to deal with two different prices for the same product due to the switch to GST that combines more than a dozen earlier levies.

To be sure, the sector is facing inflationary pressures due to rising cost of inputs such as crude oil. HUL warned that rising competitive intensity also remains a major challenge.

"In the near term, we see gradual improvement in demand. Crude volatility and currency led inflation are key risks going ahead," Mehta said.

Ahead of the results, HUL shares rose as much as 2.2% to touch a fresh 52-week high, before paring the gains to close up 0.7% in Mumbai trading. The benchmark S&P BSE Sensex lost 0.6%.

--Dhanya Ann Thoppil.

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