By Preetika Rana 

NEW DELHI-- Hindustan Unilever Ltd., India's largest consumer goods company, said Monday that its profit rose last quarter despite anemic sales as lower input costs and one-time gains from property sales offset a dip in demand growth.

The Indian arm of Unilever PLC's net profit rose 18% to 12.52 billion rupees ($202 million) in the three months ended in December from 10.62 billion rupees a year earlier. Sales rose 8% to 75.79 billion rupees.

While net profit expansion was the highest the company has recorded in 2 1/2 years, analysts said most of the extra profit came from one-time gains.

Hindustan Unilever shares plunged close to 6% after the announcement as the volume sales--which investors look at as a good indicator of demand trends--only expanded 3% during the quarter.

A weak monsoon was largely to blame for sluggish demand in rural India, which accounts for nearly half of HUL's domestic sales, analysts said.

"We had hoped for a revival of growth," said Aashish Upganlawar, a consumer goods analyst at Mumbai-based brokerage Elara Securities (India) Pvt. "But, instead, it has turned out to be a very, very disappointing quarter."

Sales at Hindustan Unilever--which sells Lux soap, Axe deodorant and hundreds of other products through hundreds of thousands of tiny shops across the subcontinent--are closely watched as an indicator of consumer sentiment in Asia's third-largest economy.

Some analysts had expected to see stronger growth as consumer and corporate sentiment has been improving in recent quarters.

India's gross domestic product grew at less than 5% in the year ended in March--a dramatic slowdown from growth rates of more than 9% several years ago.

India's central bank lowered interest rates last week for the first time in close to two years in an attempt to spur growth. If India's inflation remains in check and the central bank continues to lower interest rates as expected, then the country could see its gross domestic product growth climb toward 7% again.

The World Bank said last week that with the help of economic revamping started by India's new business-friendly prime minister, its expansion rate could outpace that of China in the next couple of years, making it the fastest-growing big economy in 2017.

Hindustan Unilever results, though, suggest the enthusiasm has yet to trickle down to the spending habits of India's consumers.

At a news conference Monday, company executives said that the market had shown "modest" signs of recovery over the last quarter.

"It takes a lag between a change in the consumer confidence and the pickup in the economy to translate into tangible improvements in volumes in the (consumer goods) sector," Chief Executive Sanjiv Mehta told reporters. "We have to give another quarter or two before we start seeing the positive impact on the economy."

Write to Preetika Rana at preetika.rana@wsj.com

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