More headache for Unilever? HUL warns of weak consumer spending, shares slide

Hindustan Unilever , controlled by consumer goods giant Unilever, warned India's consumer spending will remain weak as the economy sags after its own profit rose 8 percent on robust sales of soaps and detergents.<br />

hidden October 28, 2014 07:59:05 IST
More headache for Unilever? HUL warns of weak consumer spending, shares slide

Hindustan Unilever , controlled by consumer goods giant Unilever, warned India's consumer spending will remain weak as the economy sags after its own profit rose 8 percent on robust sales of soaps and detergents.

Net profit rose to Rs 988 crore($161 million) for the three months to Sept. 30 from Rs 914 crorea year earlier, Hindustan Unilever said in a statement on Monday. The company is two-thirds owned by its Anglo-Dutch parent, and plays a key role in Unilever's Asia operations.

Hindustan Unilever said fiscal second-quarter sales growth outstripped the broader market, but the profit number was exactly in line with an average of estimates from analysts polled by Reuters. The weak demand forecast helped send the company's shares sharply lower and pointed to future headaches for Unilever, already hit by slowdown in emerging markets which generates more than half its sales.

"We see the market continuing to remain soft. While we are conscious of this near-term concerns, we remain positive on a medium- to long-term outlook of our country's fast-moving consumer goods market," finance chief P.B. Balaji told reporters on a conference call.

Hindustan Unilever shares closed 5.1 percent lower after the results, its biggest single-day fall since January 2011, with some dealers saying its unit sales volume growth of 5 percent was below their expectations. The company has been hurt in recent quarters by weaker consumer demand in an economy that grew less than 5 percent in the past two fiscal years.

Parent Unilever last week reported its weakest quarterly sales growth in nearly five years, hit by persistent woes in Europe and the slower performance in emerging markets. It promised new, cheaper products and more cost cuts would help in raise profits.

Hindustan Unilever sales rose about 11 percent, helped by soaps and detergent sales that grew at a double-digit percentage pace, the company said, along with skincare products.

As of last week, shares in Hindustan Unilever, valued at nearly $27 billion, had risen nearly a third this year, outperforming the Nifty and the consumer goods index .

Reuters

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