Detailed Narrative
Hindustan Unilever reported a resilient performance for the quarter and half-year ended September 30, 2024. For Q2 FY25, the company achieved a reported underlying sales growth of 2%, driven by a 3% underlying volume growth. Excluding a one-off📎 indirect tax credit in the base quarter, intrinsic underlying sales grew by 3%, with underlying price growth flat. The EBITDA margin remained healthy at 23.8%. On a reported basis, profit after tax before exceptional items📎 declined 2%, but intrinsically, it grew 2%. For the first half of FY25, intrinsic underlying sales growth was 2% with 3% volume growth, and the EBITDA margin stood at 23.8%, up 10 bps year-on-year. The Board also approved an interim dividend of INR 19 per share and a special dividend of INR 10 per share, amounting to a total payout of INR 6,814 crores.
Segment-wise, Home Care delivered a strong performance with 8% underlying sales growth, fueled by high single-digit volume growth and double-digit growth in its liquids portfolio. Beauty & Wellbeing saw 7% intrinsic sales growth, volume-led, with premium skincare growing in double digits and the '6 big bets' portfolio achieving circa 30% GSV growth across modern trade and e-commerce. Personal Care, however, declined by 5% with a low single-digit volume decline, primarily due to negative pricing and muted volumes in Skin Cleansing, though sequential improvement was noted. Oral Care delivered high single-digit competitive growth. Foods and Refreshment experienced a marginal revenue decline, with underlying sales down 2%, impacted by consumer downgradation in tea, despite coffee showing double-digit growth.
Management highlighted significant progress in strengthening its competitive position, with the MAT business winning number crossing 60% in September, ahead of the December '24 estimate. Over 80% of the company's turnover now comes from 'unmissably superior' products. Strategic initiatives like the Shikhar app, which has onboarded over 1.37 million stores with more than 70% transacting monthly, and focused efforts in organized trade, are driving double-digit growth. E-commerce, representing 6-7% of the business, continues to grow faster, with quick commerce being a small but important part, particularly for ice cream (over 10% of its Q-commerce sales). Innovation remains a key driver, with new launches like TRESemme Lamellar Gloss, Vim floor cleaner, and Lakme's new makeup and lip ranges contributing over INR 80 crores in GMV.
The near-term outlook anticipates stable demand trends, with a low single-digit price growth expected in the next quarter due to commodity inflation, particularly in crude palm oil (10% YoY) and tea (25% YoY). Management aims to maintain the EBITDA margin at current healthy levels (23.8%) by dynamically managing pricing and driving productivity savings. Long-term, the company expects volume growth to trend towards natural organic levels of 3-4%. The separation of the ice cream business is expected to be finalized by the end of 2024, with a decision on the route (sell or demerge/list). The acquisition of the balance business in OZiva is slated for completion by the end of 2025.