Investsmart - HLL Result Update

Disappointing performance

Hindustan Lever Limited (HLL) posted a disappointing set of numbers for
Q4CY06. Net sales grew by just 6.1% to Rs31.56bn, driven mainly by a 10.1%
growth in the soaps and detergent business. The personal care segment,
accounting for 27.7% of total revenues in Q4CY06, registered a mere 2.5%
growth. This was due to the late arrival of winter which affected the skin
care range and also there was a subdued growth in shampoos and oral care.
The company's EBITDA margins fell by 40bps to 15.8%, resulting in a
marginal 3.8% growth in the EBITDA to Rs5bn. Net profits (excluding
extraordinary items), however, grew by 10.2% to Rs4.83bn. The growth in net
profits in Q4CY06 was also aided by 66.7% rise in other income to Rs1.07bn.

For CY06, net sales grew 9.4% to Rs121bn. EBITDA margins expanded by 60bps
to 13.6% due to an improved product mix and an increase in product prices.
Higher prices contributed to 40% of the topline growth, with volume offtake
accounting for the remainder. Advertising and sales promotion spend, as a
proportion of sales, increased from 9.1% to 10.5%, which ideally should
have resulted in higher revenue growth but it has brought little cheer to
HLL's topline. Net profits (excluding extraordinary items) for CY06
increased by 13.7% to Rs15.4bn.

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Thanks Yash