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Hindustan Unilever warns on monsoon impact, Q1 jumps

MUMBAI (Reuters) - Hindustan Unilever Ltd (HUL)(HLL.NS), India's largest consumer goods maker, warned of challenges from a deficient monsoon, persistent inflation and currency volatility when it reported a doubling of quarterly profit on Monday.

"We have to watch out for the impact of the monsoon and wait for this quarter to play out," R. Sridhar, chief financial officer said.

India has cut monsoon rains expectation to below average.

"Initial reports suggest that the monsoon has been deficient and that will most certainly have an impact on the overall economy, rural markets and price of food products ... we will have to wait and see what impact it has on demand for consumer goods," Sridhar said.

Deficient monsoons hurt rural purchasing power, as India is largely dependent on its annual monsoon rains for crop growth.

The Indian unit of Anglo-Dutch conglomerate Unilever Plc (ULVR.L) (UNc.AS) said its net profit rose to 13.3 billion rupees for the fiscal first quarter ending June 30, from 6.3 billion a year earlier, after an exceptional gain of 6.05 billion from property sales.

Net sales for the quarter rose 14 percent to 62.5 billion rupees, with 9 percent underlying volume growth.

Analysts on average had estimated a profit of 6.94 billion rupees on sales of 63.08 billion, Thomson Reuters Starmine Estimates showed.

"On a comparable basis it is slightly better than expected...the volume growth has been strong and that is one encouraging number to take with us into a very uncertain time ahead ," said Naveen Trivedi, an analyst with PINC Research.

Indian consumer goods makers face a difficult choice between raising prices and retaining market share as inflation in home, personal care and food segments, as well as weak consumer sentiment pinch margins and price increases hurt volume growth.

HUL's operating margins in the quarter rose 180 basis points from a year ago, with its operating profit rising 30 percent.

Sales at the home and personal care segment grew 21 percent, while its foods business grew 11 percent.

"The packaged foods business did well although there has been a slowdown in our beverages portfolio with mass segment tea brands not performing very well," Sridhar said.

HUL, which the market values at $17.5 billion, makes popular brands such as skin fairness cream Fair and Lovely, Clinic Plus shampoo, and soap brands such as Dove.

Shares in the company, which have risen just 9 percent since the start of 2012 compared with a 21 percent rise in the BSE FMCG index .BSEFMCG, ended 0.69 percent lower on Monday, in a weak Mumbai market which closed before the results came out.

The company trades at 26.5 times its 12-month forward earnings, compared with 15.1 times for ITC Ltd (ITC.NS), 30.9 times for Nestle, 21.6 times for Godrej Consumer, Thomson Reuters Starmine Smart Estimate showed.

(Editing by Louise Ireland)