Analyst Meet / AGM     22-Jan-25
Conference Call
HUL
Making acquisitions in fast-growing spaces to offset slow consumer demand

HUL hosted a conference call on Jan 22, 2025. In the conference call, company was represented by, Mr Rohit Jawa- CEO and Managing Director and Mr. Ritesh Tiwari- CFO.

Key takeaways of the call

In Q3 FY25, FMCG demand trends remained subdued with continued moderation in urban growth while rural sustained its gradual recovery.

Management expects moderation in consumption trends to continue in near term. The company stated that small packs are growing faster than large packs.

In line with its strategic intent, the company has made acquisitions in fast-growing spaces. The company has signed the Share Purchase and Subscription Agreement (SPSA) to acquire 90.5% of Uprising Science’s shares. Uprising is engaged in the business of haircare and skincare products under the brand name “Minimalist,” primarily selling its products in India. The acquisition includes a secondary buyout for Rs 2670 crore at a pre-money valuation of Rs 2955 crore (subject to adjustments) and a primary investment of Rs 45 crore. The company will also acquire the remaining 9.5% of Uprising''s shares as per the terms outlined in the SPSA.

This acquisition is a key step in transforming the company’s Beauty & Wellbeing portfolio, focusing on evolving and high-growth demand areas. Minimalist is one of the fastest-growing digital-first brands, and HUL’s robust offline distribution network will make Minimalist products more accessible across the country. This partnership also opens the door to expansion into international markets. Transaction is expected to close in Jan quarter 2025.

The company also approved the acquisition of the palm undertaking of Vishwatej Oil Industries, as a part of HUL’s Palm localization strategy. Palm and its derivatives are a key feedstock to manufacture a variety of HUL’s Personal Care, Beauty and Home Care products and are largely imported from Indonesia and Malaysia. HUL’s palm localization strategy aims to build supply chain resilience for palm derivatives through backward integration. The palm undertaking is based in the Kamareddy district of Telangana. The proposed plan involves setting up sapling nurseries, palm fresh fruit bunch collection centres and a state-of-the-art palm oil mill in the state.

Exceptional items in Q3 FY25 includes acquisition and disposal related net gains of Rs 574 crore.

In Q3 FY25, the company delivered flat underlying volume growth (UVG) affected by negative mix. Underlying Sales Growth (USG) was 2% YoY.

Management is confident of medium to long-term potential of Indian FMCG sector owning to factors like rising middle class, recovery in rural demand, rise of e-commerce platforms and continuous improvements in distribution networks.

During the quarter, the company has taken calibrated price increases to sustain its margin amid rising prices. Going forward, the company expects margins to improve driven by growth in premium products and improvement in operating leverage.

Management expects its market share to improve in coming quarters.

In Q3 FY25, Home Care segment grew 6% YoY led by high-single digit UVG in Fabric Wash and Household Care. Fabric Wash performance was broad based, across formats. Liquids portfolio maintained its double-digit growth trajectory.

During the quarter, Rin bar was re-launched incorporating product enhancing superior technology and Comfort underwent a comprehensive re-launch aimed at further elevating brand superiority. Household Care achieved high-single digit UVG led by outperformance in dishwash. The launch of Sun, its new liquid dishwash brand, is in line with its strategic intent to democratize liquids within the mass segment.

In Q3 FY25, Beauty & Wellbeing segment reported 1% YoY growth while UVG witnessed a low-single digit decline. Hair Care delivered mid-single digit competitive volume growth driven by strong growth in Dove, Tresemme and Clinic Plus. Performance was broad-based across sachets and formats of the future. Dove’s Hair and Scalp Therapy and Tresemme’s Silk Press range were introduced to further strengthen its future core and market makers portfolio.

Skin care was impacted by delayed winter and Colour cosmetics had a muted quarter. Sequential improvement in mass skin performance was supported by portfolio expansion. Non-winter skin portfolio delivered a mid-single digit growth. Six big bets and channels of the future continue to deliver double-digit growth. During the quarter, Lakme’s premium Rouge Bloom range, Glow and Lovely’s Glass Bright cream and Pond’s Youthful Miracle regime to name a few, were launched.

In Q3 FY25, Personal Care segment declined 4% YoY with mid-single digit volume decline. Strategic actions in Skin Cleansing have led to share gain in the quarter. Positive momentum witnessed in non-hygiene segment. Lifebuoy being relaunched to address declining hygiene segment.

Bodywash continued to strengthen its market leadership with strong double-digit growth. Accelerating its premiumisation agenda, Dove’s Serum Shower collection of soap and bodywash was launched in the quarter. Oral Care delivered mid-single digit growth led by Closeup.

In Q3 FY25, Foods & Refreshment segment witnessed flat USG with mid-single digit price growth offset by decline in volume. Tea delivered low-single digit growth led by premium brands such as 3 Roses and Taj Mahal. The category maintained its value and volume leadership. Coffee grew double-digit, led by strong performance in organized trade. Nutrition drinks continued to strengthen its value and volume market leadership while category declined due to subdued consumption.

Packaged Foods delivered mid-single digit growth led by strong performance in future core and market makers segments. Ketchup, Mayonnaise, Food Solutions, International Sauces and Cuisines continued their strong volume performance. Ice-cream revenue remained flat year-on-year. This quarter saw the launch of a new flavor of Knorr''s Korean Noodles and expansion of Horlicks Strength Plus pan-India.

Management expects FY25 ETR to be around 25.5%.

The company has demerged its ice cream business through a Board-approved arrangement and created a wholly owned subsidiary called "Kwality Wall’s (India)." This subsidiary will handle the demerged ice cream business. This demerger will provide management with greater flexibility to deploy strategies suited to Ice Cream’s distinctive business model. HUL shareholders will receive shares of the new entity in a 1:1 ratio, meaning they will get additional shares of the demerged business.


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