HUL share price

HUL’s 4% Profit Dip in Q2FY25: Can the Ice Cream Business Spin-Off Turn Things Around?

Hindustan Unilever (HUL) continues to capture attention in the market as it reported a 4% decline in standalone net profit for the September 2024 quarter (Q2FY25), falling to Rs 2,612 crore compared to Rs 2,717 crore in the same quarter last year. This announcement has placed HUL shares in the spotlight, especially after the FMCG major also declared a generous interim dividend of Rs 29 per share.

Mixed Results: Revenue Growth but Profit Decline

While net profit dipped, HUL’s revenue from operations grew modestly by 2%, reaching Rs 15,319 crore in Q2FY25, up from Rs 15,027 crore in the corresponding quarter of the previous year. Despite this growth, the figures fell short of expectations, missing the ET NOW poll estimates of Rs 2,657 crore for profit and Rs 15,792 crore for revenue.

The company’s profitability metrics saw some pressure, with EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) standing at Rs 3,647 crore, down slightly from Rs 3,694 crore in the same quarter last year. The EBITDA margin also declined, coming in at 23.8%, a reduction of 80 basis points compared to the previous year.

Rs 29/Share Interim Dividend

Despite the dip in profit, HUL announced an interim dividend of Rs 29 per equity share, marking a significant payout to shareholders. The record date for the dividend is November 6, 2024, and payments will be made on November 21, 2024. This move is likely to keep shareholders satisfied, with the total payout amounting to Rs 6,814 crore.

Ice Cream Business Separation

In a notable development, HUL’s board of directors has decided to separate the company’s ice cream business. This move aligns with recommendations from an Independent Committee that conducted a thorough review of the business. This separation signals the company’s intent to optimize its portfolio and sharpen its focus on other core segments.

Segment-wise Performance: Homecare Leads Growth

Homecare Segment
HUL’s Homecare segment delivered strong results, with Q2FY25 revenue rising to Rs 5,737 crore, up from Rs 5,308 crore in the previous year. Growth was broad-based across the segment, with both fabric wash and household care products showing high single-digit volume growth. The liquids portfolio, in particular, stood out with double-digit volume growth.

Beauty & Wellbeing Segment
The Beauty & Wellbeing segment posted revenues of Rs 3,323 crore, up from Rs 3,274 crore in the same quarter last year. The segment grew 7% in constant currency terms, with haircare brands like Sunsilk, Dove, and Tresemme driving high single-digit volume growth. The premium skincare portfolio maintained its double-digit growth trajectory, while skincare and color cosmetics saw mid-single-digit gains.

Personal Care Segment
Personal Care underperformed, with revenue declining by 5% YoY to Rs 2,412 crore. The segment faced headwinds from negative pricing and low-single-digit volume declines, particularly in skin cleansing products. However, the premium portfolio showed resilience, with bodywash products recording high double-digit growth, further strengthening market leadership. Oral Care, led by Closeup, achieved high single-digit growth.

Foods & Refreshment Segment
The Foods & Refreshment segment also faced challenges, reporting a revenue decline of 2% YoY to Rs 3,803 crore. The tea business, though, continued to dominate with both value and volume share gains. While green and functional teas showed robust growth, overall category volumes remained subdued. Coffee grew at a double-digit rate, and nutrition drinks gained market share despite subdued consumption. The foods business posted low single-digit volume growth.

CEO Commentary on Future Outlook

Rohit Jawa, CEO and Managing Director of HUL, commented on the mixed performance, stating that the FMCG sector continues to witness “moderating growth in urban markets while rural demand is recovering gradually.”

“In this context, we delivered a competitive and profitable performance. We are staying true to our strategic priorities of transforming our portfolio, ensuring healthy EBITDA margins, and generating strong cash flows, which provide attractive returns to shareholders,” said Jawa. He also emphasized the company’s commitment to investing behind aspirational brands, scaling innovations, and maintaining operational discipline.

What Lies Ahead for HUL?

With the ice cream business set for separation and a generous interim dividend on the table, HUL is positioning itself for a reshaped future. However, the company will need to address challenges in segments like Personal Care and Foods, where pricing pressure and volume declines have posed hurdles. The company’s focus on premiumization and innovation will be crucial as it navigates the evolving FMCG landscape.

Conclusion:

HUL’s Q2FY25 results reflect a mixed performance, with modest revenue growth overshadowed by a 4% decline in net profit. The announcement of a Rs 29 per share interim dividend and the separation of the ice cream business underscore the company’s commitment to shareholder returns and strategic portfolio optimization. As rural demand recovers and premium segments continue to grow, HUL is poised for further innovation and market leadership, despite the challenges in certain segments.

FAQs:

1.What is HUL’s net profit for Q2FY25?

A. HUL reported a standalone net profit of Rs 2,612 crore, a 4% decline compared to Rs 2,717 crore in Q2FY24.

2.How much is the interim dividend announced by HUL?

A. HUL announced an interim dividend of Rs 29 per share, with a total payout cost of Rs 6,814 crore.

3.What is the revenue growth for HUL in Q2FY25?

A. HUL’s revenue from operations grew by 2%, reaching Rs 15,319 crore in Q2FY25.

4.Why is HUL separating its ice cream business?

A. HUL’s board has decided to separate the ice cream business following recommendations from an Independent Committee, as part of a strategic review.

5.How did the Homecare segment perform in Q2FY25?

A. The Homecare segment saw strong growth, with revenue increasing to Rs 5,737 crore, driven by high-single-digit volume growth in fabric wash and household care.

6.Which HUL brands led the growth in the Beauty & Wellbeing segment?

A. Haircare brands such as Sunsilk, Dove, and Tresemme led the growth in the Beauty & Wellbeing segment, with high-single-digit volume increases.

7.What caused the decline in the Personal Care segment?

A. The Personal Care segment declined by 5% due to negative pricing and low-single-digit volume declines, particularly in skin cleansing products.

8.How did the Foods & Refreshment segment perform?

A. The segment faced a 2% decline in revenue, though tea and coffee products showed growth, with double-digit growth in coffee.

9.What is HUL’s EBITDA margin for Q2FY25?

A. HUL’s EBITDA margin stood at 23.8%, down by 80 basis points compared to the same quarter last year.

10.What is HUL’s outlook for the upcoming quarters?

A. HUL remains focused on innovation, premiumization, and rural recovery, with strategic investments in aspirational brands and operational efficiency.

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