FMCG major Hindustan Unilever Ltd today reported a 15.59 per cent jump in net profit at Rs 871.36 crore for the third quarter ended December 31, 2012, on account of robust sales across various business verticals.
The company's board has approved a proposal to increase the royalty payment to 3.15 per cent to its parent firm Unilever Plc. The amount, equivalent to 3.15 per cent of total turnover, would be paid for various provisions related to trademark licenses and technology, among others.
The Mumbai-headquartered firm had posted a net profit of Rs 753.81 crore during the same period of the previous fiscal.
Net sales of the company rose to Rs 6,433.69 crore for the third quarter ended December 31, 2012, as against Rs 5,844.31 crore during the same period of 2011-12 fiscal, Hindustan Unilever Ltd (HUL) said in a statement.
The company said its board, in a meeting held today, approved a proposal to enter into a new pact with Unilever Plc, with effect from February 1 for various provisions of technology, trademark licences and other services.
"The new agreement envisages that the existing royalty cost of 1.4 per cent of turnover will increase, in a phased manner, to a royalty cost of 3.15 per cent of turnover no later than the financial year ending March 2018," HUL said.
The company said the increase in royalty cost, in the period from February 1, 2013 to March 2014 is estimated to be 0.5 per cent of turnover and thereafter in a range of 0.3 per cent to 0.7 per cent of turnover in each financial year, leading up to a total estimated increase of 1.75 per cent by March 2018.
"Given the need for increased levels of service and the consequential additional costs, Unilever asked for a review of the royalty arrangements in order to ensure a fair recovery of costs," the company said.
HUL currently has a technical collaboration agreement (TCA) with and a trade mark license agreement with Unilever.
The total impact of both these agreements comes out be the royalty cost of 1.4 per cent of turnover, the company said.
"The board is satisfied that appropriate due diligence has been done and that the new arrangements reflect fair payment for the services and benefits that HUL will continue to receives," it added.
HUL Chairman Harish Manwani said in an environment that continued to be challenging, the company has delivered another quarter of broad based growth and margin expansion.
However, Angel Broking FMCG Research Analyst V Srinivasan said: "HUL has delivered a disappointing set of numbers..with 5 per cent underlying volume growth for the domestic consumer business being the lowest in three years."
Shares of HUL today closed at Rs 481.55 on the BSE, down 2.88 per cent from their previous close after falling 5 per cent intra-day. In anticipation of earnings, the HUL counter had rallied to Rs 505.40 intra-day.
The company said its domestic consumer business grew at 15 per cent during the third quarter ended December 31, 2012, as compared to the same period of previous fiscal.
"The business is consistently winning in the marketplace by remaining sharply focused on the needs of our large consumer base and successfully leveraging Unilever's strong global innovation pipeline and best practices," Manwani added.
During the period under review, the company's sales of soaps and detergents grew by 20 per cent as against the same period of 2011-12 fiscal.
Other segments like personal care products and beverages grew by 13 per cent and 18 per cent respectively, the company said.
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Hindustan Unilever Q3 rises, shares fall on higher royalties
MUMBAI, Jan 22 (Reuters) - Hindustan Unilever Ltd (HUL) , India's largest consumer goods maker, reported a 16 percent jump in third-quarter net profit, but low volume growth and a rise in royalty payments knocked its shares down as much as 5 percent.
Less discretionary spending among consumers cut sales of products such as packaged foods and personal care items, but higher prices and lower raw material costs aided margins.
The Indian unit of Anglo-Dutch conglomerate Unilever Plc said its net profit rose to 8.7 billion rupees ($161.7 million) for the fiscal third quarter ending Dec. 31, from 7.5 billion rupees a year earlier.
HUL's shares have fallen over 10 percent in the December quarter partially on concerns it may have to pay more in royalties, in line with Unilever in Indonesia, a move the company confirmed on Tuesday.
The royalty HUL pays to its parent company for use of its trademarks will gradually increase by March 2018 to around 3.15 percent of turnover, from the current 1.4 percent, it said in a statement.
The Indian company, valued at $19.5 billion, makes popular brands including skin creams Fair and Lovely, Sunsilk shampoo, Lux soap and Kissan ketchup.
Analysts had estimated a profit of 8.8 billion rupees on sales of 65.7 billion, Thomson Reuters Starmine Estimates showed.
HUL stock trades at 28.5 times its 12-month forward earnings, compared with peers ITC's 25.5 times, and Godrej Consumer's 26.5 times, according to Thomson Reuters Starmine Smart Estimate.