[vc_row][vc_column][vc_column_text css=”.vc_custom_1674289742086{border-top-width: 1px !important;border-right-width: 1px !important;border-bottom-width: 1px !important;border-left-width: 1px !important;border-left-color: #000000 !important;border-left-style: solid !important;border-right-color: #000000 !important;border-right-style: solid !important;border-top-color: #000000 !important;border-top-style: solid !important;border-bottom-color: #000000 !important;border-bottom-style: solid !important;border-radius: 3px !important;}”]

Hindustan Unilever Q3FY23 Result

[/vc_column_text][vc_separator css=”.vc_custom_1647339034936{margin-bottom: 30px !important;}”][vc_column_text css=”.vc_custom_1674289754798{margin-bottom: 15px !important;}”]Hindustan Unilever came out with their financial results on 19^th Jan 2023 after the markets. The Indian arm of global consumer goods giant Unilever Plc recorded double-digit revenue growth of 16% at ₹14,986 crore for the third quarter of the financial year 2022-23 as against ₹12,900 crore in the year-ago period. This revenue growth was largely driven by Beauty and Personal Care Segment, Home Care, and price hikes in laundry. Growth was ahead of the market with more than 75% of the business winning market shares, the FMCG major said in an exchange filing. But the major issue for shareholders was the increase in payment for royalty and central services agreement to Unilever.

On an LTM basis, margins have deteriorated.[/vc_column_text][vc_single_image image=”72571″ img_size=”full” alignment=”center” css=”.vc_custom_1674289784740{margin-top: 30px !important;margin-bottom: 30px !important;border-top-width: 1px !important;border-right-width: 1px !important;border-bottom-width: 1px !important;border-left-width: 1px !important;border-left-color: #000000 !important;border-left-style: solid !important;border-right-color: #000000 !important;border-right-style: solid !important;border-top-color: #000000 !important;border-top-style: solid !important;border-bottom-color: #000000 !important;border-bottom-style: solid !important;border-radius: 1px !important;}”][vc_column_text]Following are some highlights from post-result conference call with the management:

• Overall growth in turnover to the tune of 16% and an underlying volume growth of 5%
• EBITDA margin has decreased close to 160 bps on a YoY basis but has increase 70 bps on a QoQ basis
• EPS has increase 7% on a YoY basis but decreased 7% on a QoQ basis
• Net Profit grew 7% on a YoY basis but decreased 8% on a QoQ basis
• Growth continued to be price led and volumes declined
• Sustainability remains core to their business and they have received industry leading ranking for the same
• The quarter witnessed unprecedented inflation led by supply side issues; but the company is seeing it moderating now as compared to last quarter; this will positively affect the gross margins
• Commodities remain at an elevated levels as compared to historical levels; USD appreciation with respect to INR has also translated into lower margins for the quarter
• FMCG market grew 8% YoY in December quarter, higher than September quarter due to the benefits of festive season
• Delayed winter affected sale in categories like hand and body care, facial moisturizer etc
• Urban markets continue to lead the growth compared to rural, but rural will also witness growth as the harvest seasons comes along and inflation eases; commodity inflation is easing from its unprecedented levels; rural slowdown may also be bottoming out
• Last month, they announced foray into fast-growing health and well-being category by making strategic investment in Oziva and Wellbeing Nutrition, which was in-line with the objective to grow the portfolio in fast growing spaces
• Company witnessed stellar performance in the home care segment, a 32% growth in revenue year-on-year, generated topline of INR 5,518 crore; beauty and personal care witnessed a topline growth of 10% and generated topline of INR 5,718 crore; finally foods and refreshment segment generated a topline of INR 3,700 crore and grew 7% YoY.
• Company’s brands have been launching highly innovative, sought after and helpful products and gaining market share continuously
• Outlook remain cautiously optimistic in the near term; growth will continue to be price-led
• Royalty and Central Service Arrangement:
• Current Trademark and Technology Licensing and Central Services Agreement with Unilever will end on 31^st Jan 2023. Effective payout for this arrangement was about 2.65% of the turnover.
• HUL board has approved a new royalty and central services agreement arrangements effective 1^st February 2023 for a period of 5 years. This will involve a staggered increase in effective rate over a period of 3 years from c. 2.65% to 3.45% of turnover.
• Unilever has contributed immensely in the growth of HUL in India by providing a steady stream of benefits like faster innovation, superior products and technology, greater expertise, and enhanced services. India is one of the top three strategically prioritized markets for Unilever and hence they will continue to focus on the overall well-being of HUL.
• Agreement is for 5 years because company believes it is good corporate governance to lock-in at a shorter tenure given volatile environment
• Sanjeev Mehta confidently said that the benefit that HUL will get from their relationship with Unilever will far outweigh the cost associated with royalty and central services agreement. He also mentioned that this increase in royalty is not a reaction to the increased paying capacity due to increased topline of HUL but has been very carefully discussed by the boards involved and then reached a conclusion. This, he mentioned, should allay investor fears.

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