Unilever's India arm misses Q1 profit view on higher expenses

BENGALURU/CHENNAI (Reuters) -India's Hindustan Unilever reported a smaller-than-expected increase in quarterly profit on Thursday as the consumer goods major grappled with higher costs and tepid demand for branded tea.

Profit rose 8% to 24.72 billion rupees ($301.68 million) for the quarter ended June 30, the Indian unit of UK's Unilever said in an exchange filing.

Analysts, on average, had expected a profit of 25.97 billion rupees, according to IBES data from Refinitiv.

Demand is yet to fully rebound in rural India, which is worst affected by high inflation, with prices of essential items climbing.

Sales of branded tea have not recovered as consumers are opting for unbranded alternatives, the Brooke Bond Red Label tea maker said.

Expenses also dragged, climbing 5.5% to 119.31 billion rupees.

Analysts expect Indian consumer goods majors to see margin benefits in the next few quarters, with prices of crude, palm, and packing material easing.

Overall sales of products rose 6.5% to 149.31 billion rupees. Revenue from its top two businesses - home care and beauty and personal care - climbed 10% and 4%, respectively.

"FMCG (fast-moving consumer goods) markets are recovering gradually although the operating environment remains challenging," Chief Executive Rohit Jawa said in a statement.

Shares closed 1.2% higher on Thursday, taking their gains to nearly 6% this year.

($1 = 81.9418 Indian rupees)

(Reporting by Varun Vyas in Bengaluru and Praveen Paramasivam in Chennai; editing by Eileen Soreng)