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Hindustan Unilever third-quarter profit gains 8.9% as sales volumes surge

Demand from Indian rural markets, cost controls also help

Hindustan Unilever, the country's largest consumer goods maker.    © Reuters

MUMBAI (NewsRise) -- Hindustan Unilever, India's biggest consumer goods maker, reported an 8.9% increase in third-quarter net income, in line with market expectations, aided by surging sales volumes and cost control measures.

For the three months ended in December, the Indian unit of the Anglo-Dutch Unilever reported a profit of 14.44 billion rupees ($203 million). Analysts were expecting the company to post a net income of 14.42 billion rupees, according to Refinitiv data.

The latest quarter included exceptional charges worth 620 million rupees, compared with 210 million rupees a year earlier, related to restructuring expenses and acquisition-related costs.

Revenue grew more than 12% to 93.6 billion rupees on the back of sustained strong volume expansion. The sales volume, one of the most important metrics tracked by analysts, grew 10%, outperforming market expectations for a 6% to 8% expansion. The quarter also saw HUL product prices increase by 2%-3%.

"Consumer demand during the quarter has been stable," Srinivas Phatak, chief financial officer at HUL, told reporters at a news conference. "Rural markets continue to grow ahead of urban."

Consumer goods companies such as HUL, whose brands such as Lux soaps, Lipton Tea, and Dove shampoo are sold through thousands of mom-and-pop stores across the country, are riding on a strong revival in demand from rural areas after reasonably good monsoon rains.

The growth is also driven by a revamp in the way products are distributed via online platforms and departmental stores, especially after the rollout of a nationwide Goods and Services Tax as well the festival season in October-November when consumer spending typically surges.

HUL's fifth consecutive quarter of double-digit volume growth "reflects strong recovery in rural demand aided by good monsoon over the last two years and increasing government spending in an election year," ICICI Direct Research said. "We continue to believe this growth is structural in nature and the momentum would continue in the medium term."

The quarter included the financial performance of the ice cream brand Adityaa, which HUL had bought from south India-based Vijaykant Dairy and Food Products for an undisclosed amount in August.

The quarter also saw Unilever agreeing to buy the Horlicks nutrition business of GlaxoSmithKline for $3.8 billion, a move that will allow the company to break fresh grounds in the nutritional drink market. HUL said it is in the process of getting requisite approvals from the competition regulator and stock exchanges to complete the deal.

HUL's margins expanded 170 basis points during the quarter.

While the near-term demand remains "stable," Phatak said the company is watchful of the macro-economic environment amid volatility in crude and commodity prices and policy changes ahead of India's federal elections in May.

HUL shares lost 1.1% in Mumbai trading before the company released the earnings. The benchmark S&P BSE Sensex gained 0.2%.

--Dhanya Ann Thoppil

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