Detailed Narrative
Hindustan Unilever Limited concluded its financial year 2025 with a subdued performance, reporting a turnover of ₹60,680 crores, alongside an underlying sales growth (USG) and underlying volume growth (UVG) of 2% each. The gross margin for the year stood at 50.3%, a 50 basis points decline year-on-year, primarily attributed to business mix and increased investments across distribution channels. EBITDA margin also saw a slight contraction of 30 basis points, settling at 23.5%. Despite these pressures, Profit After Tax (PAT) grew by 5% year-on-year, benefiting from the profit realized from the divestment of Pureit. The company also declared a total dividend of ₹53 per share for FY25, marking a 26% increase year-on-year.
For the March quarter (Q4 FY25), the company delivered a competitive performance with a 3% USG and 2% UVG. Gross margin for the quarter was 49.8%, down 160 bps year-on-year, impacted by commodity inflation in palm oil, tea, and coffee that was not fully priced for. EBITDA margin for Q4 FY25 was 23.1%, a 30 bps decline. Segment-wise, Home Care delivered a robust 3% USG with mid-single-digit volume growth, driven by strong double-digit growth in its liquids portfolio. Beauty & Wellbeing also grew 3% in USG, with Hair Care showing high single-digit UVG. Personal Care, however, saw a decline of 3% in USG, while Foods turnover decreased by 1% due to volume decline. The Market Makers portfolio continued its strong double-digit volume growth, and the e-commerce channel achieved circa 40% gross sales value growth.
Management outlined a strategic shift towards aggressive investment to drive future growth, particularly in "Future Core" and "Market Makers" portfolios. This includes revitalizing core brands like Lifebuoy and Glow & Lovely, expanding into new segments (e.g., Prestige beauty in FY26), and leveraging digital channels. The company reported significant progress in its direct value-weighted distribution, increasing it by 400 basis points over 18 months to 69%. Acquisitions like OZiva have scaled significantly, with its annual revenue run rate growing from ₹100 crores to ₹400 crores, and achieving profitability from an initial 40-50% EBITDA loss. Minimalist also exceeded ₹500 crores in turnover for FY25.
Looking ahead, management expressed a bullish outlook for the near to medium term, anticipating a gradual improvement in demand driven by favorable macroeconomic conditions such as a normal monsoon, lower food and crude inflation, and monetary stimulus. They expect the first half of FY26 to perform better than the second half of FY25. The company has revised its near-term EBITDA margin guidance to 22-23% for the next 2-3 quarters, down from a previous range of 23-24%. This moderation is a deliberate strategic choice to "lean in" with investments in innovations, channels of the future, and portfolio transformation, prioritizing volume-led competitive growth over short-term margin expansion. They anticipate margins to start improving in the later half of FY26.
Key risks and concerns discussed included the impact of commodity inflation on gross margins, particularly in Tea, Coffee, and Skin Cleansing, which may lead to further pricing actions in the coming quarters. The Nutrition Drinks category continues to face headwinds and has declined, prompting strategic actions to step up consumption and premiumization. Despite these challenges, management conveyed strong confidence in their revamped portfolio, enhanced capabilities, and the overall long-term growth potential of the Indian market, reiterating their commitment to achieving double-digit EPS growth in the medium to long term.