concalls

HINDUNILVR

Earnings Call Summary - Q4FY25

Hindustan Unilever Limited Earnings Call Analysis

1. Summary of Quarterly Results

| Metric | Value | Change | |--------------------------------|------------------------|-----------------------------| | Turnover | ₹60,680 crores | Underlying sales growth of 2% driven by underlying volume growth of 2% | | Net Material Inflation (NMI) | Flat | Indicates price actions offset inflation and deflation in various segments | | Cross Margin | 50.39% | Down 50 basis points (bps) YoY | | EBITDA | 23.59% | Down 30 bps YoY | | Profit After Tax (PAT) Before Exceptional Items | Increased by 19% YoY | | | Profit After Tax (PAT) | Increased by 5.6% YoY | Includes profit from disposal of Pureit | | Absolute Volume Tonnage Growth | Mid-single digit | Competitively grown, partially offset by negative mix resulting in 2% growth |

Segment Performance

  • Home Care: Delivered high single-digit volume growth; mid-single digit translated to 3% USG.
  • Beauty & Wellbeing: Volume growth of 3.6% in the quarter; Hair Care grew in double digits.
  • Personal Care: Volume-led competitive growth; Skin Care and Colour Cosmetics declined in low single digits.
  • Foods: Turnover declined by 1% in the quarter; Tea showed improved sales trajectory, Coffee delivered double-digit growth.

2. Management Guidance and Outlook

  • EBITDA Margin Guidance: Revised down to 22% - 23.96% from the previous range of 23.1% - 24.6%.
    • Reason for Revision: Increased investments across all lines of the P&L to drive growth, including trade channels, product quality, A&P, and innovation.
  • Near to Midterm Outlook:
    • Growth Expectations: First half of financial year '26 expected to outperform the second half of '25.
    • Macro Conditions: Anticipated improvements due to monetary stimulus, tax relief, lower food and crude oil inflation, and higher agricultural output.
    • Investment Focus: Stepping up investments behind market-making platforms and strategic capabilities to support portfolio transformation.
  • Long-Term Aspiration: Commitment to achieve modest margin improvements over the medium term, contingent on stable commodity prices and continued growth momentum.

3. Key Analyst Concerns

Question 1: EBITDA Margin Guidance Adjustment

  • Concern: Understanding the rationale behind the nearly 100 bps moderation in EBITDA margin guidance.
  • Management Response:
    • The adjustment is not due to specific segments but to dial up investments across all areas for growth.
    • Investments include trade channels, product quality, A&P, and innovation costs.
    • Emphasized that the margin guidance reflects a strategic decision to prioritize growth over short-term margins.

Question 2: Performance in Nutrition Drinks

  • Concern: Improving performance in Nutrition Drinks amid category headwinds.
  • Management Response:
    • Focused on revitalizing the Hortlcks portfolio, doubling down on Adult Nutrition, and expanding Boost into new formats and regions.
    • Emphasized that margins are not the issue; instead, increased investments are aimed at driving consumption and category growth.

Question 3: Competitive Landscape in Detergent Category

  • Concern: Impact of competitive intensity in the liquid detergents portfolio and potential need for further price reductions.
  • Management Response:
    • Home Care remains a large and optimized category with stable competitive dynamics.
    • In liquids, achieved double-digit growth through strong brand performance and strategic investments.
    • Emphasized commitment to maintaining competitive pricing without excessive reductions.

4. Management Tone Analysis

The overall tone of management during the earnings call was confident and growth-oriented. Despite revising the EBITDA margin guidance downward, the emphasis was placed on strategic investments to drive long-term growth and strengthen market leadership. Management conveyed optimism about the improving macroeconomic conditions and the effectiveness of their portfolio transformation initiatives. There was a clear focus on being proactive ("leaning in") to capitalize on growth opportunities, signaling a shift towards an offensive strategy rather than being defensive.