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HINDUNILVR

Earnings Call Summary - Q4FY24

Hindustan Unilever Limited Q1 FY2024 Earnings Call Analysis

1. Summary of Quarterly Results

Key Financial Metrics:

  • Underlying Sales Growth:
    • Year-over-Year (YoY): 3%
    • Quarter-over-Quarter (QoQ): 1%
  • Underlying Volume Growth:
    • YoY: 2%
    • QoQ: 2%
  • EBITDA Margin:
    • Yearly: Increased by 40 basis points (bps) to 23.8%
    • Quarterly: 23.4%, a decline of 30 bps YoY
  • Net Profit:
    • FY2024 Milestone: Crossed ₹10,000 crores
  • Profit After Tax (PAT):
    • YoY Growth:
      • Before Exceptional Items: 4%
      • After Exceptional Items: 2%
    • Quarterly Decline:
      • Before Exceptional Items: -3%
      • After Exceptional Items: -6%
  • Earnings Per Share (EPS):
    • Grew by 2% YoY

Segment Performance:

  • Home Care:
    • Annual Underlying Sales Growth (USG): Double-digit (2-year CAGR)
    • Quarterly Growth: 1% with mid-single-digit volume growth
    • Margin: 19%
  • Beauty and Personal Care:
    • Annual USG: 2%
    • Quarterly Growth:
      • Beauty & Wellbeing: Mid-single-digit volume growth
      • Personal Care: Declined by 10%
    • Margin: 26%
  • Foods & Refreshment:
    • Annual USG: Mid-single-digit
    • Quarterly Growth: Mid-single-digit USG with flat volumes
    • Margin: 19%

Dividends:

  • Final Dividend: ₹24 per share
  • Interim Dividend: ₹18 per share
  • Total Dividend for FY2024: ₹42 per share (8% YoY increase)

2. Management Guidance and Outlook

Future Outlook:

  • Demand Trends: Expect gradual improvement in FMCG demand.
  • Monsoon Forecast: Above-normal monsoons anticipated.
  • Macro-Economic Indicators: Improving, supporting growth.
  • Pricing Outlook:
    • Near-Term: Low single-digit decline in price growth.
    • Mid-Term: Price growth to plateau and turn into low single digits by the end of FY2024.
  • Strategic Focus:
    • Volume-Led Growth: Emphasis on competitive volume growth across business segments.
    • Segmental Enhancements: Addressing underperformance in segments like skin cleansing.
    • Operational Efficiency: Continuation of the net productivity program to generate savings.
    • Investment: Reinvestment of savings behind brands and strategic capabilities.
  • Long-Term Opportunities:
    • Economic Growth: Leveraging India's booming economy and expanding affluent population.
    • Premiumization: Capitalizing on under-indexed FMCG spend and digital transformation to drive premiumization.

Past Guidance Delivery:

  • Volume Growth: Achieved positive volume growth in 75% of the business.
  • Margin Improvements: Continued focus on building back gross margins through operational excellence and strategic investments.

3. Key Analyst Concerns

Product Category Performance:

  • Liquids Across Categories:
    • Concern: Competitor disruptive pricing in fabric wash liquids.
    • Response: Emphasized leadership in liquids, ongoing innovation, and strategies to maintain market share despite increased competition.
  • Soaps Business:
    • Concern: Volume decline and competitive performance.
    • Response: Attributed decline to lapping high base and mass segment challenges; corrective actions taken to improve formulations and pricing to recover volumes.
  • Beauty and Personal Care:
    • Concern: Decline in Personal Care segment.
    • Response: Highlighted growth in Beauty & Wellbeing, especially in premium brands, and ongoing premiumization efforts to drive volume and maintain margins.
  • Distributor Margins:
    • Concern: Changes in distributor margins impacting smaller city distributors.
    • Response: Reported increased distributor margins and improved service levels, maintaining healthy attrition levels and ROI.
  • Horlicks Perception:
    • Concern: Social media noise regarding sugar content in health drinks.
    • Response: Clarified that sugar levels are within regulatory standards and emphasized functional health benefits of the category.

Pricing and Inflation Impact:

  • Concern: Potential price hikes due to macroeconomic factors affecting rural consumption.
  • Response: Confident that FMCG is a small part of the consumption basket, expecting gradual recovery in rural consumption driven by better monsoon and macro conditions.

Channel Salience and Growth:

  • Concern: Growth of quick-commerce and its impact on margins.
  • Response: Highlighted strategic focus on high-margin portfolios in e-commerce and quick-commerce, expecting sustained growth without significant margin pressure.

4. Management Tone Analysis

Overall Tone:

  • Confident: Management exhibited strong confidence in their strategies to navigate challenges and capitalize on growth opportunities.
  • Proactive: Demonstrated a proactive approach in addressing underperforming segments and implementing corrective measures.
  • Strategic: Emphasized strategic investments in premiumization, innovation, and operational efficiency to drive long-term growth.
  • Optimistic: Showed optimism about future demand trends, macroeconomic improvements, and the company's ability to maintain and enhance market leadership.

Comparative Tone:

  • Consistent Confidence: Compared to previous calls, management maintained a consistent confident tone, reinforcing their commitment to strategic initiatives and resilience in performance.

Conclusion

Hindustan Unilever Limited showcased a resilient performance in the March Quarter and FY2024, with strong underlying sales and volume growth. Despite challenges in specific segments like Personal Care and soaps, the management remains confident in their strategic initiatives to drive premiumization, innovation, and operational efficiency. The outlook remains positive with expectations of gradual demand improvement and macroeconomic support, positioning HUL well for sustained growth in the evolving FMCG landscape.