Hindustan Unilever Q4 FY25 earnings call

Hindustan Unilever Limited concluded FY25 with a turnover of ₹60,680 crores, achieving 2% underlying sales growth and 2% underlying volume growth. The FMCG market faced subdued demand, characterized by gradual rural improvement and urban moderation. Gross margin for the year stood at 50.3%, a 50 bps decline YoY, while EBITDA was 23.5%, down 30 bps YoY, primarily influenced by business mix and increased investments across distribution channels. PAT grew 5% YoY, benefiting from the Pureit divestment.

The company is executing a strategic portfolio transformation, shifting 200 basis points from Core to Future Core and Market Makers segments, aiming for over 80% of growth from these high-potential areas. Key initiatives included the comprehensive 6P relaunch of core brands Lifebuoy and Glow & Lovely to meet evolving consumer needs. The Future Core portfolio delivered competitive value and volume growth, and the Market Makers portfolio achieved double-digit growth, exemplified by Ponds' double-digit USG.

HUL is intensifying its focus on Channels of the Future, with e-commerce contributing circa 40% gross sales value growth and quick commerce, though 2% of the business, growing rapidly. Investments include doubling assortment and enhancing availability in quick commerce. Digital media spends have been accelerated, with influencer marketing increasing by approximately 40%, to drive social-first demand generation and improve on-shelf and online availability by 200 and 500 basis points, respectively.

The company completed the acquisition of a 90.5% stake in Minimalist, which recorded over ₹500 crores turnover in FY25. OZiva, acquired in 2023, scaled its annual revenue run rate from ₹100 crores to ₹400 crores and achieved profitability, moving from a 40-50% EBITDA loss to breaking even. The divestment of Pureit unlocked circa ₹600 crores, and the demerger of the Ice Cream business is progressing, expected to be completed by the end of FY26, alongside strategic investments in palm localization and plastic circularity.

The Nutrition Drinks segment faced headwinds in Q4 FY25, leading to a decline in performance. HUL plans a three-pronged strategy to boost consumption: revitalizing Horlicks for contemporary relevance, doubling down on the ₹500 crore Adult Nutrition business through medical marketing and chemist engagement, and expanding the Boost brand into new regions and ready-to-drink formats. Management emphasized that margins are healthy in this category, providing ample scope for investment to drive growth.

HUL projects a gradual improvement in growth trends, with H1 FY26 expected to outperform H2 FY25, driven by positive macroeconomic factors like a normal monsoon, monetary stimulus, and lower inflation. Despite commodity inflation, the company plans to maintain EBITDA margins in the 22-23% range for the next 2-3 quarters by strategically increasing investments across the P&L, including trade channels, product quality, and A&P, to prioritize volume-led competitive growth and strengthen market leadership.