(Reuters) -Hindustan Unilever reported a nearly 5% decline in profit before tax and exceptional items for the second quarter, as sales volumes took a hit before the government’s goods and services tax cuts kicked in.
The Indian unit of UK’s Unilever, home to brands such as Dove soap and Surf Excel detergent, said its profit before tax and exceptional items fell to 33.89 billion rupees ($385.57 million) from 35.64 billion rupees a year ago.
Overall revenue from the sale of products grew 2% year-on-year to 160.34 billion rupees, benefitting from price hikes across HUL’s portfolio and resilient demand in the company’s beauty division. The segment posted a 5% year-on-year rise in sales, led by skincare and cosmetics.
HUL shares as much as 3% post the results, but pared gains. They were last trading about 1% higher.
Nonetheless, overall underlying volume growth was flat, as the company, along with peers, faced a temporary disruption in sales after the government announced sweeping goods and services tax cuts in August.
Distributors and retailers focused on liquidating existing inventories, delaying the flow of new orders ahead of the tax cuts taking effect on September 22.
HUL said in a media call that the sales disruption did not impact the skincare and cosmetics business much. The segment posted “high single-digit” sales as a result, with premium products doing most of the heavy-lifting.
The company, which said its EBITDA margin declined by 90 basis points in the reporting quarter, expects disruptions from the tax cuts in its overall portfolio to improve from November onwards.
Its profit after tax rose 3.6% as the company recorded a one-time gain of 1.84 billion rupees.
Parent company Unilever beat sales forecasts on Thursday, driven by strong demand for its beauty products across North America and emerging markets.
($1 = 87.8950 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai and Ananta Agarwal in Bengaluru; Editing by Janane Venkatraman)
