UN Unilever NV

BANGALORE (Dow Jones)--Hindustan Unilever Ltd. (500696.BY), India's largest consumer goods maker by sales, Monday beat market estimates with an 18% jump in net profit for the quarter through December but failed to impress investors as its sales didn't match expectations.

The Unilever PLC (UL) unit's sales volume growth in the fiscal third quarter slowed, albeit on top of last year's high base, as sales of personal care products like Pond's skin cream and Pears glycerine soap were muted despite the onset of winters.

HUL's quarterly net profit rose to INR7.54 billion from INR6.38 billion a year earlier, beating the INR7.06 billion average of estimates in a Dow Jones Newswires poll of 16 analysts.

Sales grew 16% to INR58.53 billion, a tad slower than the INR58.91 billion poll forecast.

The HUL stock, which has risen more than 20% in the past six months, closed 3.5% lower at INR386.70 on the Bombay Stock Exchange on profit-taking. The benchmark Sensex gained 0.6% in comparison.

HUL, which gets more than 90% of its revenue locally, said sales volume at its local consumer goods business grew about 9.1%. This compares with 9.8% growth in the September quarter and 13% growth in the same period last year.

"Global uncertainty and local factors have adversely impacted consumer sentiment in the quarter," Chief Financial Officer R. Sridhar told reporters during a post-earnings conference call.

A slowdown in the local economy and uncertainty stemming from global problems such as the euro-zone debt crisis have led Indian shoppers to postpone purchases of discretionary items.

Thus, personal products sales for the just-ended quarter increased just 14% to INR18.86 billion compared with an 18% growth in the September quarter and 19% in the June quarter.

But sales at its soaps and detergents segment--accounting for 45% of overall revenue--rose a robust 21% to INR26.46 billion.

HUL has been taking calibrated price hikes in this segment to pass on high commodity prices, though sometimes it has sacrificed profits to retain and grow market share in the face of cut-throat competition.

The company raised prices by about 7.0% on average across categories in the first nine months of this financial year, Sridhar said, adding that it increased soap prices as recently as the current quarter.

The price hikes and some cost savings helped HUL grow its profit margin before interest and tax by 230 basis points from a year earlier. The margin improved despite the cost of goods sold going up by 140 basis points.

-By Rumman Ahmed, Dow Jones Newswires; 91-9845104173; rumman.ahmed@dowjones.com

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