Hindustan Unilever Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Hindustan Unilever Ltd (HINDUNILVR) Q2 FY24 Earnings Concall

• Q2 Performance
  • HUL crossed INR 15,000 crores quarterly turnover for the first time.
  • Underlying sales growth was 4% with volume growth around 2.5%.
  • EBITDA margin improved 130 bps to 24.6% year-on-year.
  • PAT before exceptional items grew 12% and EPS grew 4%.
• Market Share Trends and Focus Areas
  • Gained share in over 60% of business by value.
  • Continues to gain volume share in over 75% of business.
  • Some losses in value shares in mass segments of portfolio.
  • Grow core brands through product superiority and execution.
  • Transform parts of portfolio through on-trend spaces in Beauty and Foods.
  • Execution and tailoring portfolio through design for channel approach.
  • Reset cost base through net revenue management programs.
• Macro Environment
  • Demand trends stable, market growing high single digits.
  • Rural demand remains subdued, urban and modern trade leading.
  • Price growth moderating as input costs have declined.
• Skin Care And Color Cosmetics Growth
  • Double-digit growth driven by brands like Ponds, Lakme, and Indulekha.
  • Extending brands into new growth spaces like sun care and serums.
  • Innovating in formats like face washes with Simple.
• Focused Interventions In New Demand Spaces
  • Targeting new formats like serums and masks that are growing fast.
  • Entering new spaces like hydration and sun protection.
  • Leveraging channels like e-commerce for growth.
• Rural Demand
  • Rural volume growth improved to 8% this quarter vs -6% last year, but still below pre-pandemic levels.
  • Inflation moderating leading to more disposable income and FMCG expenditure in rural areas.
  • Uneven monsoon and its potential impact on kharif harvest and rabi sowing are risks.
• Resurgence Of Small/Local Players
  • Seen in categories like detergent bars and tea as commodity prices softened.
  • Small players growing faster than larger players.
  • HUL over indexed in premium segments, so mass segment growth impacts overall value growth.
• Tea Business Performance
  • Saw downgrading trend from premium tea to mass/loose tea.
  • Loose tea prices fell more than premium tea prices.
  • Led consumers to switch to cheaper loose tea options.
  • Impacts HUL more as premium tea player.
• Volume Growth Outlook And Pricing Actions
  • Gradual recovery in volumes expected as high inflation moderates.
  • Supporting factors: Inflation moderating, upcoming festive season, resilient urban income growth.
  • Taken price cuts in skin cleansing and laundry categories this quarter.
  • Expect marginally negative price growth in near term if costs remain stable.
• A&P Spending
  • Currently at 11.4% of sales versus 7.2% last year.
  • Principles: Share of voice ahead of market share, frequency and reach objectives.
  • Will remain firm given competitive intensity and support growth.