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Price cuts on soaps, detergents, hit Hindustan Unilever profit

A pedestrian walks past the Hindustan Unilever Limited (HUL) headquarters in Mumbai January 19, 2015. REUTERS/Danish Siddiqui/Files

MUMBAI (Reuters) - Hindustan Unilever Ltd (HLL.NS), India's largest consumer goods firm, said price cuts for key products including soaps and detergents dragged down its profit in the second quarter, missing market estimates despite improved sales.

Grappling with weaker demand in rural India, the Indian unit of the Anglo-Dutch consumer group Unilever Plc had slashed prices for items like its Lux soap -- part of a segment which accounts for nearly half its revenue.

That helped drive sales volumes up 7 percent and revenues up 5 percent, but hit the bottom line, the company said.

"We don't see a substantial step up in rural growth compared with what we have had in the past," PB Balaji, the company's chief financial officer told reporters on Wednesday.

HUL, seen as a barometer of Indian consumer sentiment, has been under pressure in recent quarters. Demand from India's villages contributes about 35 percent to its total sales, but a weak monsoon and rising food prices have squeezed households.

Balaji said he expects future growth to be driven by volume, as raw materials have become cheaper in recent months.

The maker of Lipton Tea and Dove shampoos posted a quarterly net profit of 9.62 billion rupees ($147.9 million), down from 9.88 billion a year earlier. Net sales climbed to 78.20 billion rupees.

Analysts on average were expecting a profit of 10.43 billion rupees, according to Thomson Reuters data.

($1 = 65.0400 Indian rupees)

(Reporting by Zeba Siddiqui in Mumbai; Editing by Clara Ferreira Marques and Keith Weir)