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Nestle delights, HLL disappoints

HLL posts a worse-than-expected 13.6% rise in quarterly profit while Nestle India delighted investors with a 22.39% growth in net profits.

business Updated: Apr 30, 2007 19:36 IST

FMCG companies have posted mixed results this quarter. India's biggest consumer goods maker, Hindustan Lever Ltd (HLL), posted a worse-than-expected 13.6 per cent rise in quarterly profit while Nestle India delighted investors with a 22.39 per cent growth in net profits.

"Nestle India and Smithkline have posted exceedingly good results, Hindustan Lever and Godrej have been disappointing," said Anand Shah, an FMCG analyst with Mumbai-based ICICI Securities. Smithkline and Godrej had announced their results earlier, while HLL and Nestle reported their results on Monday.

HLL could grow its bottomline only by 13.6 per cent in the quarter ended March 2006 against analyst expectations of 20 per cent growth in net profits. This is despite a 13.8 per cent jump in sales and higher product prices. The HLL scrip was down 5.9 per cent on the BSE while Nestle was up 1.44 per cent.

HLL’s bottomline has come under pressure from higher prices of materials like palm oil and linear alkyl benzene, inputs used to soap and detergents. Intense competition has also forced it to spend more on advertising.

"Inflationary pressures remain a cause for concern but we continue to steer aggressive cost effectiveness programmes, manage judicious price increases and drive for an improved portfolio mix," HLL chairman Harish Manwani said in a statement.

"We expected the personal care business to grow in double digits but it reported a growth of only 10 per cent. We expect the company to do well in the next few quarters, driven by growth of existing businesses," said ICICI Securities’ Shah. But a less-than-normal Monsoon could impact purchasing power, say analysts.

Nestle, on the other hand, posted a 22.39 per cent growth in net profits to Rs 108.45 core for the quarter ended March 2007 on the back of a 28 per cent growth in sales to Rs 870 crore for the quarter ended March 31, 2007.

"The work done in innovation and renovation in particulars in the area of nutrition, health and wellness and the setting of appropriate structures is now reflecting in our performance," said Nestle India CMD Martial Rolland in a statement.

"While we are in a better position to accelerate our growth, the environment continues to be challenging especially on the price of commodities and employee costs (white collar jobs). Various initiatives are undertaken to mitigate them," Martial Rolland added.