Hindustan Lever profits jump 20%

Hindustan Lever has refocused on 30 core products

Hindustan Lever, India's largest company by stock market value, has reported a 20.5% jump in net profits.

"The growth in revenue has exceeded even the most optimistic forecasts, though the profit growth is not too great," said Anand Shah, analyst at ICICI Securities.

Lux is one of the top selling products promoted by film stars

The Bombay-based maker of Dove beauty soap and Red Label tea, 51% owned by Anglo-Dutch Unilever, said net profit rose to 3.99bn rupees (£57.6m; $83m) over the July-to-September quarter, from 3.31bn a year before.

The results reflect the company's strategy over the past year to concentrate on 30 of its most profitable brands, such as Surf detergent and Lux soap.

While profits were in line with expectations, net sales rose 7.0% to 26.3bn rupees, beating forecasts of a 3.0% rise.

Tea push

Hindustan Lever said it planned several initiatives for its tea business which accounts for nearly 15% of total revenue.

We are in the same space as say a Pepsi and Coca Cola.

vice-chairman M Sharma

"We want to encourage out of home consumption of tea and are setting up tea vending machines in different parts of the country," chairman MS Banga said.

According to vice-chairman M Sharma, it will no longer suffice to compete with other tea brands alone.

"We are in the same space as say a Pepsi and Coca Cola. So we will introduce our own chilled tea - Lipton Ice.

"Also we want to make sure that tea is not seen as a dull beverage. We have to make it young and happening and offer tea as an exciting alternative to the teenage and youth segment."

The company is also trying to give a boost to its ice-cream business by introducing more "ethnic" flavours and increasing numbers of vending machines.

Monsoon impact

In comments following the results announcement, Hindustan Lever was hesitant about its business outlook.

It said that as well as global economic uncertainties, it was also unsure about the impact of what the Indian government has described as a seventh successive year of good monsoon in the country.

"We are still assessing the impact of the monsoon. The rainfall has been good in north and west India. But not so good in the south," said Mr Banga.

"Also, rural demand will not pick up just because of a good monsoon.

"That will happen only if the farner gets good realisation for his crop. That will depend on the procurement price the government will be willing to pay the farmers.

"But with reports about the government having surplus stocks... will the farmers get a good price for their produce?"

In a country where 60% of the population still lives in villages, sales of consumer goods companies such as Hindustan Lever are strongly influenced by rural demand and the amount of disposable income in the hands of farmers.

Foreign increase

The company's board has also approved an increase in the limit on foreign ownership to 49% from 24%.

Hindustan Lever's shares were up 1.5% at 227.2 rupees after the results, while the main Bombay index was up 0.32%.

The Bombay index has risen back to around 3,150-points, the level before the 11 September attacks, on the strength of domestic company results.

Hindustan Lever has operated in India since 1888 and is the country's largest consumer goods company.