HINDUNILVRNSEJanuary 22, 2025

Hindustan Unilever Limited

15,169words

80turns

11analyst exchanges

0executives

Key numbers — 40 extracted

benign. Crude oil prices continue to deflate during the quarter and rupee depreciated by around 1% against the dollar. However, significant volatility has been observed in crude palm oil, crude oi

INR15,195 crore

ion through inflationary and deflationary cycles. In this backdrop, HUL delivered a turnover of INR15,195 crores with an underlying sales growth of 2%, led by pricing. Underlying volume growth was flat. Our

In this backdrop, HUL delivered a turnover of INR15,195 crores with an underlying sales growth of 2%, led by pricing. Underlying volume growth was flat. Our margins have remained healthy despite inf

50%

ve remained healthy despite inflationary and mix pressures. For the quarter, our gross margin was 50%, while EBITDA at 23.5% was within our range of 23% to 24%. PAT BEI at INR2,540 crores remained

23.5%

espite inflationary and mix pressures. For the quarter, our gross margin was 50%, while EBITDA at 23.5% was within our range of 23% to 24%. PAT BEI at INR2,540 crores remained flat year-on-year. EPS

23%

essures. For the quarter, our gross margin was 50%, while EBITDA at 23.5% was within our range of 23% to 24%. PAT BEI at INR2,540 crores remained flat year-on-year. EPS grew 19% year- on-year on acc

24%

. For the quarter, our gross margin was 50%, while EBITDA at 23.5% was within our range of 23% to 24%. PAT BEI at INR2,540 crores remained flat year-on-year. EPS grew 19% year- on-year on account of

INR2,540 crore

our gross margin was 50%, while EBITDA at 23.5% was within our range of 23% to 24%. PAT BEI at INR2,540 crores remained flat year-on-year. EPS grew 19% year- on-year on account of profit from disposal of Pure

19%

s within our range of 23% to 24%. PAT BEI at INR2,540 crores remained flat year-on-year. EPS grew 19% year- on-year on account of profit from disposal of Pureit business. As you recall, we had annou

60%

s you are aware, over the last year, our business winning percentage had temporarily dipped below 60%. In September quarter, we told you that this metric was back to 60%. This 4/40 D

95%

our focus on ensuring fundamentals of the business remains strong. We have now assessed more than 95% of our portfolio using the unmissable brand superiority framework. I'm very happy to report that

80%

rtfolio using the unmissable brand superiority framework. I'm very happy to report that more than 80% of our turnover is unmissably superior when compared to competition, indicating our continued r

Guidance — 20 items

Shilpa Kedia

opening

“We expect this to take around 35 minutes, leaving us with approximately an hour for the Q&A.”

Rohit Jawa

opening

“For the 2024 Diwali season, Moti launched the Din Din Diwali campaign with an aim to keep the essence of Abhyanga Snan alive by combining nostalgia with modern entertainment elements.”

Rohit Jawa

opening

“In our future core portfolio, we have identified 10 aspirational brands that we intend to transform into big master brands.”

Ritesh Tiwari

opening

“These initiatives aim to align our products with evolving consumer needs and market trends, ensuring they remain competitive and appealing.”

Ritesh Tiwari

opening

“Pursuant to the scheme, 1 equity share of the new entity will be allotted for every 1 equity share held in HUL.”

Ritesh Tiwari

opening

“Upon demerger and listing of the entity, the entire shareholding will be held directly by shareholders of HUL.”

Ritesh Tiwari

opening

“Given our large beauty business and complementary capabilities and expertise that both the business will enjoy together, we expect synergies to come from: One, R&D and innovations.”

Ritesh Tiwari

opening

“Being part of the Unilever group, we can leverage Unilever's global presence to expand the business to drive target consumers and markets.”

Ritesh Tiwari

opening

“Leveraging our scale and efficiency, we will be able to unlock capacity and generate margin synergies.”

Ritesh Tiwari

opening

“So, this primary basically infusion, along with the pre-money enterprise value of INR2,955 crores, as I mentioned, as subject to closing adjustments will be the total acquisition price that we'll end up giving.”

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Risks & concerns — 15 flagged

Knorr joined forces with Squid Game 2 for a one-of-a-kind campaign where 45 creators showcased their unique take on Dare to Slurp challenge.

— Rohit Jawa

The impact of higher commodity costs across parts of the portfolio and adverse mix were deftly managed by leveraging the strength of our global procurement operations, landing calibrated pricing actions in the market and sustained focus on generating savings across the lines of P&L.

— Ritesh Tiwari

Revenue for Personal Care declined by 4%, impacted by decline in hygiene segment of skin cleansing.

— Ritesh Tiwari

Here, if I see high-single digit volume growth, of course, industry should not be growing at that level given the urban slowdown.

— Abneesh Roy

And -- can we conclude that maybe, let's say, 80% confidence that, let's say, the risk associated with the formulation change is very low today?

— Manoj Menon

One place which has been a challenge is consumption, which is titrated down with, of course, some inflation coming in, in the recent past.

— Rohit Jawa

The concern is that sometimes in these very fast-growing small companies are acquired by really large companies like HUL, it could lead to a little bit of loss of direction, the founder would probably leave after some time.

— Arnab Mitra

There are more systems and processes to follow, decision-making and slowdown.

— Arnab Mitra

Is there that risk as we head into, let's say, March and June quarter?

— Vivek M

But overall, I don't believe that we will have, let me say, more stress coming in, in terms of consumption trends go forward.

— Ritesh Tiwari

And yes, the trends are like quite difficult to predict.

— Vivek M

Rohit and Ritesh, in the context of what you have said and let's say, 30th November or somewhere there versus now, do you think there is also a risk to this negative mix what you have seen so what you mentioned in this quarter, premiumization continues?

— Vivek M

If I look at mix going forward, I do believe and we do believe at this point in time that the impact of small pack negative mix should self-correct in a quarter or so, number one.

— Ritesh Tiwari

So hence, I would say this is more of a conversation which has got accentuated given the development of small pack in the current quarter, but we don't see concern going forward in terms of mix improvement.

— Ritesh Tiwari

Just wanted to understand, apart from the winter care portfolio impact, is there any other sort of a little bit of slowdown that you have seen in BPC?

— Percy Panthaki

Q&A — 11 exchanges

I have two questions. My first question is on Minimalist acquisition. So, in Beauty business, you're under-indexed in premium versus rest of the Unilever's portfolio in India. So, wanted to understand, once Minimalist, the execution is done, the scale-up in the off-line is done and the synergy benefits, etcetera, are achieved, say, in the next 2 years, where does the numbers move in terms of under indexation? Do you achieve that goal? Second question also on Minimalist. So, these are part of the same question is, from a pricing architecture and product portfolio gap, what exactly Minimalist is

Ritesh Tiwari

Yes. Thanks, Abneesh, for the question. So overall, at the Capital Markets Day, we have spoken that we are under indexed on premium as far as Beauty & Wellbeing is concerned and there are many parts of the business, which are today over indexed on premium, but that is not the case of Beauty & Wellbeing. What we want to achieve over the next few years is 900 bps improvement of portfolio shift towards premium. With that, we will more than cover the gap that we have to a fair share for premium. Minimalist acquisition makes a big step in that direction. And we are very confident that with Minimali

Would you be able to call out what is your base case expectation from Minimalist over the next 2, 3 years, whatever targets, milestones you may have?

Ritesh Tiwari

So, I will not share any specific numbers, Jay, but let me just give a little bit of articulation. As I mentioned that this business overall sits at masstige price point and the actives-led space, which is a very attractive space because 2/3 of the market of masstige sits in there. So definitely be high growth. And today, our own 6 big bets within Beauty & Wellbeing, grows at strong double digit. And when it comes to Minimalist, very sharp brand crafted and extremely successful. We do expect high growth from the business to come, especially when we start bringing synergies that I was talking a

Thanks for higher disclosures this time. Just one clarification, team actually on the comment about absolute volumes outperforming the UVG aspect that you also called out, it's not a Home Care driven, it's actually non-home care. The context of this question is over the last, let's say, 4 quarters or maybe 3, definitely this fiscal, at least the perception was, let's say, macros or the bottom of the pyramid consumption should get better. Probably this is the first time in a while, it seems you're actually calling out a deceleration or a deterioration. Is that the right interpretation?

Rohit Jawa

I think -- no, no. I think what is -- first of all, rural is stronger. So, in that sense, that's a big part of the population consumer base that is stronger and is getting better. So -- and that does consume largely small packs and lower-tier brands in terms of price points. Urban, yes, the real issue there is we see more recently, demand compression. And importantly, this quarter, we've seen titration from large packs to small packs, across categories, especially the more discretionary the category is, more titration there is, less so in Home Care. 23/40 December Quarter 2024 Earnings call of

Actually, my first question was again on the outlook. So there has definitely been a change in what you saw as an outlook 3 months back versus now, which was stable consumption to moderating consumption. I think you partly answered it in the previous question, but is this change because you saw a worsening of trends towards the second half of December quarter, including the small pack down trading that you mentioned? And if that is the case, could it get worse before it improves at the market level? Or do we have to take out a message that the worst is behind, and things should improve from he

Ritesh Tiwari

Yes. So, Arnab, important question, we should spend some time on it. So, we had spoken in the previous quarter that the demand trends are stable. When we saw muted, we had a comment in the last quarter that we expect demand trends to be stable, which means it will be at a similar level as we saw in the previous quarter. And now having experienced one more quarter, we see of a similar view that the moderation that we have seen will be there in near term to continue. And as we unpack similar trends, Arnab, as we saw in the previous quarter as well that overall growth in urban has been moderating

Two questions. My first question is the same on the demand trend. So, we met in November, I think, end of November, and you have had, let's say, a particular thought process on what you were seeing on the ground, and it looks like that December has moderated. So, what Arnab asked, I have the same question that I understand this is transitory, but do you think that it can get worse as we go forward before it starts to stabilize and then get better? Is there that risk as we head into, let's say, March and June quarter?

Ritesh Tiwari

No. So, Vivek, as we have seen multiple parameters, of course, all of us read all economical parameters, but more importantly, as we see consumption trends up and close across the length and breadth of the country across channel, we don't believe there's a -- let me say, there's a material issue, which is going up. And hence, yes, there is a moderation in urban demand, there is a gradual recovery of rural. That trend is playing out as we have spoken consistently for the last couple of quarters. Small pack size, we mentioned is more transitory in nature. We've seen that happening, it self-corre

Just wanted to understand, apart from the winter care portfolio impact, is there any other sort of a little bit of slowdown that you have seen in BPC? A few quarters ago, you had said that the premium part, which is approximately INR2,000 crores, that is growing at 20%. So, is that 20% growth rate maintained? 34/40 December Quarter 2024 Earnings call of Hindustan Unilever Limited And secondly, the slowdown that we saw in the mass skin care over the last 2 quarters or so, has that remained at that same level? Or has it accelerated? So that's my first question.

Ritesh Tiwari

So yes, the INR2,000-odd crores portfolio that we have, Percy, at the 6 big bets we've spoken about, the growth trajectory of that portion of the business continues to remain strong. And even this quarter, we have grown in good double digits that portfolio of INR2,000 crores, both in organized trade and, of course, a pretty good amount of growth in e-commerce as well. On mass skin cleansing, let me hand over to Rohit. On mass skin care, that is an area we do feel that there's an improvement sequentially. There's work to be done. If you really ask me, that's the sort of primary area in skin car

I have a few questions. The first one is just trying to get flavor on…

Management

Yes, is it better now?

Management

Okay. My first question was if you could provide some flavor on the growth for modern trade channel during the quarter. Did it have any bearing on offtake of larger packs versus smaller pack? And on the second question was on Oral 37/40 December Quarter 2024 Earnings call of Hindustan Unilever Limited Care, if you could give us some flavor on this mid-single-digit growth? Was it pricing led or it was a balanced volume and price led? Thank you.

Ritesh Tiwari

Yes. So overall organized trade, if I just probably bucket and that's how we typically want to speak. Overall, organized trade, if I look at modern trade e- commerce put together, they have grown in double digit. Overall, if I look at the segment and growth like everything else put together, even that has slowed down compared to the previous quarter. So, we have grown at double digit. And we know that, Latika, whenever we grow in a channel double digit, especially modern trade and e-commerce as an organized trade, there's always a growth of the geography, but equally important is the channel s

My first question was with respect to the Beauty & Wellbeing margins. For last few quarters, we have been seeing a decelerating trend. So just wanted to understand -- and I understand that we are making investments here, but just wanted to understand where the margins should stabilize? 38/40

Ritesh Tiwari

Yes. So, I think you self-answered the question and very clear that A - beauty December Quarter 2024 Earnings call of Hindustan Unilever Limited margin enjoys a healthy margin compared to the total aggregate Hindustan Unilever. And this is an area we've called out consistently that we will invest, and we are investing in more innovations, more investments, more capabilities. And we know that as we end up growing the business ahead of the average of HUL, the mix benefit will come, and hence, it will self-pay in terms of P&L ROI. And so, we are okay for the margins to drop so far as the growth i

Okay. Thank you, Dorwin. We do not have any new questions on the web. With that, we now come to the end of the Q&A session. Before we end, let me remind you that the playback of this event will be available on the investor website in a short while. Thank you, everyone, for your participation, and have a great day.

Management

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Speaking time

Ritesh Tiwari

Rohit Jawa

Moderator

Percy Panthaki

Vivek M

Latika Chopra

Manoj Menon

Shilpa Kedia

Abneesh Roy

Arnab Mitra

Opening remarks

Shilpa Kedia

Thank you, Dorwin. Good evening, everyone. Welcome to the conference call of Hindustan Unilever Limited. This evening, we'll be covering the results for the quarter ended 31st December 2024. On the call with me is Rohit Jawa, CEO and Managing Director, and Ritesh Tiwari, CFO. We will start with the prepared remarks from Rohit and Ritesh. We expect this to take around 35 minutes, leaving us with approximately an hour for the Q&A. We will look to end the call by 7:30 p.m. Before we get started with the presentation, I would like to draw your attention to the safe harbor statement included in the presentation for good order sake. I hand it over to Rohit.

Rohit Jawa

Thank you. Good evening, everyone. Wishing you and your families a wonderful New Year. Welcome to HUL's earnings call for the quarter ended December 2024. I'll start with an update on the operating context and commodity pricing, followed by an overview of our performance and key highlights of the quarter. Ritesh will then present our results in greater details, share more information on our recently announced acquisition and round it up with our near-term outlook. Beginning with an overview of the operating context. At the MAT level, total FMCG volume growth has slowed down over the last 6 months, indicating subdued demand. Within this, urban growth continues to moderate while gradual rural recovery is sustained. Reflective of the current macroeconomic situation, market data for the quarter shows a step-up in the pace of growth for small packs across the portfolio. This 3/40 December Quarter 2024 Earnings call of Hindustan Unilever Limited seems to be a transitory shift in consumer pat

Ritesh Tiwari

Thank you, Rohit, and good evening, everyone. Wishing you and your loved ones a very happy and prosperous New Year. Let me take you through our quarter results in detail. Rohit spoke to you about the FMCG consumption trends and commodity inflation witnessed in the quarter. In this context, we have delivered a competitive underlying sales growth of 2%, driven by pricing. The impact of higher commodity costs across parts of the portfolio and adverse mix were deftly managed by leveraging the strength of our global procurement operations, landing calibrated pricing actions in the market and sustained focus on generating savings across the lines of P&L. Gross margin for the quarter stood at 50%. Our proactive measures effectively restricted the gross margin dilution to 70 basis points year-on-year. EBITDA margin was maintained within the healthy range of 23% to 24%, while we continued to invest behind our brands and remain competitive in our A&P spends. Profit after tax at INR3,001 crores,

Shilpa Kedia

Thank you, Rohit and Ritesh. With this, we will now move to the Q&A session. We request you to kindly restrict the number of questions to a maximum of 2 at a time. In case, you have any further questions please join the queue again. In addition to the audio, our participants have an option to post the questions through the web option on your screen. We will take those questions just before we end. With that I would like to hand the call back to you Dorwin to manage the next session for us. 16/40 December Quarter 2024 Earnings call of Hindustan Unilever Limited

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