Hindustan Unilever Ltd, the Indian arm of Anglo-Dutch consumer group Unilever, saw a smaller-than-expected rise in quarterly sales volumes as urban shoppers reined in spending in a sluggish economy, sending its shares down more than 5 percent on Monday.
The maker of Dove soap, Sunsilk shampoo and Lipton tea said it aimed to revive demand by bringing down prices on some of its products, passing on to consumers the benefits of lower material costs such as oil.
"We had to stop sales for a few days as we cleared the pipeline to get the fresh prices in stores. Without that, we expect volumes would have been in the range of what was expected," chief financial officer PB Balaji told reporters.
"We don't see market volumes changing in a big way, but there will be some pick up in the future," he said.
Hindustan Unilever is Asia's largest consumer goods maker by market capitalisation and has a large distribution network that goes beyond towns and cities to villages and rural parts, making it a barometer of Indian consumer sentiment.
For the quarter ended Dec. 31, the company posted a 3 percent rise in volumes. Analysts, on average, were expecting growth of about 6 percent.
Hindustan Unilever makes about 60 percent of sales to urban consumers. During the quarter, rural shoppers bought more than their city counterparts, but those purchases were mostly in low-priced small packs and sachets, Balaji said.
The company has been hurt in the last few quarters by weaker consumer demand in Asia's third-largest economy that grew less than 5 percent in the past two fiscal years.
The weak volumes are likely to reflect on parent Unilever, which makes more than half of its sales in emerging markets and is set to announce results on Jan. 20.
Hindustan Unilever's standalone net profit for the three months to Dec. 31 rose to 12.52 billion rupees ($202.85 million)from 10.62 billion rupees a year earlier. During the quarter, there was an exceptional gain of 3.97 billion rupees, it said.
Without that gain, which was mostly from a sale of company property, the profit was below analysts' forecast of 10.81 billion rupees, according to Thomson Reuters data.
Hindustan Unilever's shares fell as much as 5.8 percent, their biggest one-day drop since July 2009, before recovering slightly to end down 5.2 percent.
($1 = 61.7200 Indian rupees)