Hindustan Lever has declared a 46 per cent drop in profits at Rs244.49 crore for the quarter ended June 30, 2004, compared with Rs450.93 crore in the same quarter last year.
Net sales during the period slipped 5 per cent to Rs2,571.64 crore from Rs2,700.97 crore in the corresponding quarter of last year. The company has declared an interim dividend of Rs2.50 per share with a face value of Re1.
It now seems as though its price war with Procter & Gamble in detergents and shampoos that did not quite lead to the much hoped for spurt in volumes has taken its toll.
In the last quarter HLL cut prices on some of its detergent and shampoo brands on an average of 20-25 per cent which led to some increase in demand but not sufficient to cater to the loss in revenue.
And surprisingly, in detergents and personal care products the losses were lower than expected and the company managed to limit the decline in revenue to 2.8 per cent while personal product sales actually grew in value.
The company has suffered losses in other areas as well. Lower treasury income and higher interest costs have hit profit before tax, which fell 42.6 per cent to Rs328.79 crore while expenditure went up 3 per cent to Rs2,252.75 crore.
Treasury income dropped to less than half of last year's levels and was responsible for almost 15 per cent of the Rs247-crore drop in gross profits. Rising interest costs on bonus debentures accounted for another 12 per cent while advertising expenses shot up by 30 per cent, further eating into the company's profits.
The company also reported lower profitability in beverages, processed foods and exports.