Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hindustan Unilever Ltd (BOM:500696, Financial) reported a robust volume growth of 4% for the June quarter.
- The company achieved a revenue of INR15,166 crores, driven by strong performance in key segments.
- EBITDA margin improved to 23.8%, up 20 basis points year-on-year.
- The company maintained a gross margin of 50.9%, up 170 basis points compared to the previous year.
- Net profit grew by 3% year-on-year, reaching INR2,538 crores.
Negative Points
- Rural growth continues to lag behind urban growth, despite some recent recovery.
- Underlying sales growth was only 2%, impacted by negative pricing actions.
- The Skin Care segment, particularly the mass portfolio, showed muted performance.
- The Foods & Refreshment segment witnessed flat volume growth, with hot beverages and nutrition drinks underperforming.
- The company faces ongoing challenges from volatile commodity prices, particularly in tea and crude oil.
Q & A Highlights
Q: My first question was actually on the soaps changing technology. Just a few questions here. One is, is it across all the brands that you have? And has Unilever tried this technology in any other large market like India? Have you seen any feedback on any quality issues there? And how should we think of, you know, the risk-off making such a big change in a large category like soaps?
A: Yes. So Lux, and Lifebuoy, as you know, these are the two largest brands Arnab that we have and the largest team, both of these brands now have gone live with this change. This technology Arnab which was taken as more than five years to get it curated, get it protected has been tested extensively, not only lab test in clinical tests, but also with thousands of consumers. And the decision is completely unanimous that it's a far better quality product, the benefit of our to skin cleansing, the benefit of skin barrier, the benefit of previous delivery, the benefit of sensitivity are very many. So we do believe that this is a dramatic step-up on overall product superiority that we have in this space. That's number one. Number two, as I called out that this technology is to your question that well tested. India, as you know, is the largest market of so far in the world for Unilever. So this is a place where this is first getting live. And with doing this across the Board, as I mentioned earlier, this is not only great in terms of product, but also good in terms of business model with reduction in palm usage overall which gets overall changed and we end up using both polysaccharide, vitamin blends and skin actives, the formulation overall becomes more resilient to overall volatility in palm market. We also now into localizing a group of materials with this change. So overall, it better for the product combination of financial business model with a superior product it's better for the environment with this change. And we also moved our entire to the palm oil to as we call it, NDP., which is no deforestation, no peat. So that has gone like this means also 20% reduce greenhouse gases. So from our perspective of sustainability business model for superiority, this is a move that we have done and we have 20 plus patent that we filed as part of this entire technology chain. So we are very encouraged that this has gone higher scale, and this should help us to further drive our business model very strong strongly and hard.
Q: My second question was actually on margin expansion. So you did mention the fact that you probably will get into some kind of a low single-digit pricing in the second half. So the fact that in a very benign environment, your margins have been kind of flattish in the recent few quarters, would it basically be operating leverage that is now needed for margin expansion to come in on the top-line growth? Or are there any other levers that you are looking for to get back into a modest expansion annually?
A: Yeah. So as you mentioned in, in short term, we would want to maintain our current levels of margin in modest term important. There's two or three big drivers, Arnab, that will help us to drive margins going forward in modern time period. Number one has absolutely appoint operating leverage. Today the pricing is negative. You heard our view ignoring the one off that you have on the base, it will be basically near zero and then we should get into low single digit price going forward. So in fullness of time, healthy market volume growth, healthy pricing put together will give us the operating leverage that's number one. Number two mix improvement. Our intention is to keep driving growth ahead in premium part of the portfolio. Last three years alone, we have seen 300 bps improvement and increase roughly in our premium part of the portfolio. So overall mix improvement is the second driver which helps us to get growth in terms of margin. And third, we do have some more jobs to be done in all these portfolios, we required where the supply chain synergies and remodeling that we're doing will give us more amount of savings in time to come. So these are the three vectors which will be determining our moderate margin expansion going forward in medium term.
Q: You know in the UVG of around 4% this quarter. You know, if you could just broadly help us understand how much is mix and how much is the actual tonnage volume growth and also you know for the context, let's say, how this would have trended over the quarters and over the years. So that's question number one. Secondly, when it comes to the calling out of green shoots at this point in time. Some more color on GAL and CP et cetera would be helpful. If I push it in a sub question there is some comments and relative competitive activity you know in the beauty space as well. Thank you.
A: Sorry, what was the third part was competitive actually where?
Q: In beauty specifically.
A: So coming to UVG, you've seen our commentary, we spoke about that Home Care high single digit UVG growth. B&W had mid-single digit UVG growth. Personal Care, which had a declining UVG in the previous quarter and we spoke on the four different actions that we're doing that has shown some early signs already and we have grown volume in this quarter at low single digit. It's F&R space where the volumes are flat. So if I just probably spend a little time on F&R, you know that we have called out that with two years of deflation, we have seen down gradation of the market. So though the premium Tea is growing, Taj is growing. Green tea is growing, so it's flavored Tea. It's the mark end of the tea, which is getting more downgraded and which is where we have a volume. This point in time the volume goes up, grows are muted. HFD, which is our Nutrition Drink Business, a good amount of further progress on market on penetration, the job that we started to do for last few quarters, we called out on further building consumption remains at top priority. All actions have been put and hopefully we start seeing traction of that in times to come. So that's an overall color of UVG. Within -- if I talk about the Beauty & Wellbeing again, Hair Care had a very strong double digit UVG performance. And we don't typically give a split Manoj and give our numbers out of mix and tonnage. So I would not be able to share that. But suffice to say there is everybody is contributing, mix is contributing and so is volume is contributing to arrive at a total 4% UVG. And our trends have been to some extent up and down depending upon which part of the portfolio you have seen up and down in the quarter. But by and large if I talk about secular trend, both mix and tonnage have contributed in terms of UVG performance. We at just some specifics, which you asked for GAL and CP. Our overall Hair Care performance, I called out had a strong double-digit volume growth. Clinic Plus brand has also
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
