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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