Hindustan Unilever Limited December Quarter 2010 Results Sustained double digit growth; Turnover exceeds Rs 5000 crores

investments -1.8% Mumbai, January 25 th 2011: Hindustan Unilever Limited (HUL) announced its results for December Quarter 2010. With sustained double digit underlying volume growth in the Domestic Consumer business (+13%), Net Sales grew 12% during the quarter and ahead of the market in aggregate. Home and Personal Care business grew by 11.6% with competitive growth in both Laundry and Personal Wash. Laundry portfolio was further strengthened and Rin delivered record volume growth. Personal Wash also grew ahead of the market with Lifebuoy growing strongly post the relaunch and the premium portfolio continuing to deliver robust growth. Personal Products grew strongly at 20%; Growth was broad based across categories with Skin Care delivering a particularly strong performance. Skin Care growth was innovation led, both on the core and in emerging segments. Fair and Lovely, Ponds White Beauty and Vaseline Healthy White continued to deliver robust sales growth. Both Hair and Oral performed well across the key brands. Dove Hair range was relaunched with Fiber Actives and in Oral, a new variant Close-up Fire-Freeze was successfully introduced. Foods business grew 11.3%. In Tea, Red Label was relaunched and continued to deliver double digit growth.

Coffee growth was robust, across conventional and instant coffee, with price point packs performing particularly well. Knorr Soupy Noodles sustained its strong momentum and is now available nationally. Ice-cream grew by 31% with good growth across formats. Pureit continued to expand its franchise with product offerings across multiple price and benefit positions. Overall, the water business grew strongly and in line with action standards. Input cost inflation continued to rise during the quarter. Cost of goods sold went up by 220 bps, as a result of steep rise in material costs, especially in commodity sensitive categories. A&P spend grew by 17% to maintain market competitiveness and to develop emerging categories. Consequently, operating margins were lower by 320 bps. Buying efficiencies and cost saving programs remain a priority and are being further scaled up. Financial income increased by Rs. 38 crores through further improvement in working capital and sound treasury management. Profit after tax but before exceptional items declined by -2.1%, while Net Profit declined by -1.8%. Harish Manwani, Chairman commented: Our strategy is working and is reflected in the consistent double digit underlying volume growth over the last four quarters and ahead of market growth. We continue to strengthen our leadership in core categories, even as we invest to build opportunities for the future. In an inflationary environment, we will manage our business dynamically, through judicious pricing actions and increased focus on cost effectiveness, while ensuring that we remain competitive in the market place.

sector to grow at 13%: CII

AGENCIES

Mumbai: Despite a growth of only 11 per cent in Q2 FY 11 as against 12 per cent in the year-ago period, the Indian FMCG sector is expected to grow at 13 per cent in the current fiscal, a CII report on the FMCG sector said. "Though rising food inflation and high input costs have hurt the FMCG sector in the first-half of the fiscal, the industry is optimistic about its performance during the full year," CII Director General, Chandrajit Banerjee, said in a statement here today. The survey, covering around 30 FMCG products, said that India's FMCG sector has registered a drop in growth at 11.4 per cent in Q1 FY 11 as against 12 per cent growth in the year-ago period. The performance further dropped in the second quarter at 11 per cent, due to high input costs. However, the sector is optimistic to grow at 13 per cent during the fiscal as... commodity prices are expected to ease on the back of a good monsoon. The on-going festive season would also boost sales, thus improving margins, the study added. Categories such as detergent powders, washing cakes, toothpowder, liquid soaps, shaving products and coconut oil are expected to grow from 10 to 20 per cent. Meanwhile, initiatives and strategies such as mergers and acquisitions, overseas expansion, innovations and launches with smaller packs to tap the vast rural market would also accelerate growth, the survey said. The survey has also identified some major challenges such as fake products, which amount to a loss of around Rs 2,700-crore to the exchequer. Rising input costs, increase in packaging cost and higher logistics cost due to fuel price increase are affecting the profit margins of FMCG companies. Pro-active Government measures such as early implementation of GST, strict monitoring and controlling of prices, enforcement of copyrights and better infrastructure facilities would boost the.. sector's growth, it said

FMCG, healthcare sectors hold promise in 2011

Upturn in investment cycle to be trigger for strong performance of stocks. Our Bureau Mumbai, Dec. 31

Year 2011 would be the year of FMCG and healthcare sectors, say market experts. It was refreshing to see sectors such as FMCG and healthcare which are typically perceived as defensive' by many, figure in the bracket of top performing sectors for 2010, said Mr K. Anant Rao, CEO, Kurtosis Analytics and Advisors. Not many would have placed their bets on these two sectors in 2010 and I feel they will continue to outperform in the coming year 2011 as well, he added. I would stick with the domestic consumption theme across sectors as these could be safe bets, said Mr Kishor Ostwal CMD CNI Research. A significant upturn in the investment cycle would be the key driver for continuous strong performance stocks across sectors, say market experts. Oil and gas, steel and metals would see better performance in case the economy upturns, said Mr Aneesh Srivastava, CIO - IDBI Federal Life Insurance Co Ltd The introduction of the Direct Taxes Code will provide further relief to the salaried class and boost consumption, they say. In India we see a shift beyond consumer staples, to autos, media, cable distribution, retailing, health-care and airlines all beneficiaries of higher income levels, said Mr Gopal Agrawal, Deputy CIO and Head Equity Mirae Asset Global Investments (India) Ltd. Rising rural consumption on the back of higher crop realisations, rising wages and wealth effects through higher land and gold prices, will provide a multi-year theme, he added. Three factors will enable the pharma sector to do well in 2011. They are: lower penetration of Western medicines, industry estimates which forecast a higher two-digit annual expansion for the domestic industry; and the huge number of patent expiry of drugs in the developed markets. M&A Activity India Inc closed deals close to $55 billion during the year, an all-time record. With the expectations of a 16-18 per cent growth in earnings for the Indian corporates along with an optimistic economic growth forecast and a focus on improving infrastructural facilities, India continues to remain an attractive investment destination for global investors in the upcoming New Year, said Mr D.R. Dogra, MD &CEO, CARE Ltd . The M&A activities are also likely to continue their current pace as companies are comfortable in adopting the inorganic route to expand and increase their market share, he added. Concerns Experts say that realty, infrastructure and power would underperform in 2011. Sectors which are sensitive to interest rates won't be a great bet for 2011, said Mr Rao. Commodities globally have given an excellent return in the last decade and expecting a repeat of the same performance in the new decade would be unfair, he added. Investors would continue to remain cautious over issues such as the 2G spectrum and other scams and corporate governance matters, said Mr Dogra. These can dampen the premium enjoyed by the Indian markets currently, he added. Investors may avoid highly priced IT, telecom, banking and auto stocks, said Mr Ostwal. There would be pressure on banking especially with respect to liquidity and net interest margins, said Mr Srivastava. Industrials could be the dark horse of 2011 if the government gets its act together on infrastructure spending and the private sector embarks on capacity expansion, concludes Mr Agrawal.

Spate of price hikes spells good fortune for FMCG industry

Aarati Krishnan BL Research Bureau FMCG players seem to be regaining their pricing power, with Hindustan Unilever taking price increases of 5-8 per cent in soaps and detergents, Dabur India hiking prices by 3-4 per cent and Britannia Industries 5-10 per cent on select brands of biscuits over the past six months. After dealing with rampant inflation, bruising competition and parsimonious consumers in 2009 and 2010, listed players in the fast-moving consumer goods (FMCG) segment can now look forward to an easier year ahead. A 20 per cent increase in Corporate India's wage bill, strong hiring plans and a good monsoon may put consumers in a mood to spend more lavishly on FMCGs this year. Rural, wage push to demand As escalating food prices took a bite out of the consumer wallet for much of 2009 and 2010, leading FMCG companies were forced to cut selling prices in categories such as detergents, hair oils and biscuits to drive volume growth. FMCG behemoth Hindustan Unilever closed 2009-10 with a decline in its sales, while the top line for the 12 leading listed players crept up only by 2 per cent. Demand rebound However, demand for FMCGs appears to be on the rebound in recent months.

For one, with food price inflation subsiding from a peak, consumers are beginning to again experiment with aspirational' products, pushing up sales for skin care products, health supplements and processed foods in the recent September quarter. Two, the good monsoon and a rebound in agricultural output is helping rural demand for the breadand-butter FMCGs such as soaps and shampoos. Players such as Dabur India note that rural sales of shampoos and toothpastes grew at higher rates than urban sales in the April-September period. Colgate Palmolive, Hindustan Unilever and Dabur, who derive over half of their sales from rural India, may be the key beneficiaries of this. Sales growth for the listed FMCG companies thus averaged a reasonable 10 per cent in the first half of 2010-11, aided mainly by better sales volumes. What could also keep the higher FMCG demand going is the fact that Corporate India is back to handing out handsome wage hikes. For the first six months of 2010-11, the combined wage bill of the listed BSE 500 companies shot up by 20 per cent, putting an additional Rs 17,000 crore in the hands of its workforce. This income buoyancy seems to be allowing FMCG makers greater freedom to pass on rising input costs to their consumers. In fact, with input costs rising, soap and detergent selling prices have already been pegged up by 5-6 per cent, coconut or hair oils have seen prices rise by 10-13 per cent, and biscuits by 5-10 per cent in the last six months.

FMCG
Similar to the June quarter, the September quarter performance of FMCG companies is likely to reflect a good volume growth, but adverse impact on margins. Less penetrated categories, like personal care items, household care items are likely to log a double-digit growth. However, high-clutter categories with intense competition are expected to witness down trading by consumers and may grow in single digits. Raw material costs and ad spend are two major items of cost heads that consumer goods companies have to contend with. Due to competition, companies are compelled to advertise - although some rationalisation in this cost head was witnessed in the preceding June quarter. While raw materials costs are off their peaks, they are still higher than their year-ago levels. This input cost pressure is still likely to continue for more quarters. Companies are taking intermittent price increases on their products. However, sincethe benefit of the price rise comes at a lag - the situation is likely to correct itself only over the next 3-6 months. FMCG major HUL has adopted a mixed pricing strategy during the quarter. As per media reports, the company has reduced prices of its detergent Surf Excel Blue on certain large stock-keeping units by 21%. However, it has taken price increases in case of some other items like coffee. Marico does not intend to increase price further despite a steady rise in copra prices. Companies with strong pricing power of their brands manage to forge high volume growth compared to their peers. Hence, products that face high competition could see stunted growth in volumes. HUL faces competition across most of its categories. While its soaps and detergent category is expected to log poor

performance, its other categories like personal products and processed foods are likely to drive its growth. Britannia, Dabur, Godrej Consumer and Marico are present in high-cluttered categories in the domestic market while ITC and Nestle are better placed.
Source - Economic Times

BSE FMCG SECTOR

3920.45
20.23
(0.52%)
Oct 10, 15:39 Intraday OPEN: PREV CLOSE: 52 Week

3,891.57 3,900.22

HIGH: LOWS:

3,937.36 3,878.24

6,469.59 3,171.61

Simple Moving Averages 30 Days 3,919.60 Returns - BSE FMCG SECTOR YTD : 6 Months: 6.41% 1 Week 7.80% 1 Year : 1.80% 1 Month: 8.10% 2 Year : -0.80% 3 Months: 39.30% 3 Year : 50 Days 3,940.86 150 Days 3,824.05 200 Days 3,736.95

-3.

110.

Returns - BSE FMCG SECTOR YTD : 6 Months: 6.41% 1 Week 7.80% 1 Year : 1.80% 1 Month: 8.10% 2 Year : -0.80% 3 Months: 39.30% 3 Year : -3.80% 110.70%

Oct'11 HIGH LOW CLOSE

Sep'11 3937.36 3776.19 3920.45

Aug'11 4028.26 3727.56 3910.39

Jul'11 4137.07 3805.12 3949.57

Jun'11 4132.14 3967.82 4093.12

May'11 4057.32 3714.96 4045.42 3861.20 3561.51 3858.14

Stocks Comprising The BSE FMCG SECTOR

NAME Colgate Dabur India Godrej Consumer HUL ITC SECTOR Personal Care Personal Care Personal Care Personal Care Cigarettes LAST PRICE 981.70 99.80 389.50 332.40 200.20 MKT. CAP. 13,350.41 17,385.63 12,603.84 71,830.30 155,616.20

BSE FMCG Index

Name

Industry

Curr Price 967

Change Prev.Close Open (%) 0.06 966.4 965.9

Mkt Cap(Rs cr) 13328.7

COLPAL

ColgatePalmolive (India) Ltd Dabur India Ltd Godrej Consumer Products Ltd

DABUR GODREJCP

104 396

0.87 -0.35

103.1 397.4

103.45 17890.3 400 12966.7

HINDUNILVR

Hindustan Unilever Ltd ITC Ltd

334

-0.13

334.45

333.75 75334.8

ITC

193.9

-0.46

194.8 228.2

194.35 153789 230 2601.86

MCLEODRUSS Mcleod Russel India Ltd NESTLEIND RUCHISOYA Nestle India Ltd Ruchi Soya Industries Ltd

228.75 0.24

4173

0.00

4173 110.05

4173

40683

110.95 0.82

110.95 3707.96

TATAGLOBAL

Tata 84.3 Global Beverages Ltd United Spirits Ltd 780.5

0.42

83.95

84.95

5290.41

MCDOWELL-N

1.31

770.4

780

10427.2

0.496% 0.496%
VALUE: 9,9 VALUE: 9,945.750 INR

CNX FMCG Index(CNXFMCG:IND)

45.750 INR

CNX
Snapshot
SUMMARY ONE-YEAR CHART INTERACTIVE CHART

Value

9,945.75

Change

49.100 (0.496%)

Open

9,864.10

High

10,001.20

Low

9,842.50

Interactive Chart

CHARACTERISTICS OF THE INDIAN FMCG SECTOR

Heavy launch costs on new products on launch advertisements, free samples and product promotions. Majority of the product classes require very low investment in fixed assets Existence of contract manufacturing Marketing assumes a significant place in the brand building process Extensive distribution networks and logistics are the key to achieving a high level of penetration in both the urban and rural markets Factors like low entry barriers in terms of low capital investment, fiscal incentives from government and low brand awareness in rural areas have led to the mushrooming of the unorganized sector Providing good price points is the key to success