Hindustan Unilever Limited (HINDUNILVR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Hindustan Unilever Limited Conference Call for the Results of Quarter ended 30th June 2026. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yogesh Mulgaonkar, Head of Investor Relations and Head of Finance, Personal Care. Thank you, and over to you, sir.

Thank you, Darwin. Good afternoon, everyone. Welcome to the conference call of Hindustan Unilever Limited. This evening, we will be covering the results for quarter ended 30th June 2026. On the call with me is Priya Nair, CEO and Managing Director; and Niranjan Gupta, our CFO. We will start with prepared remarks from Priya and Niranjan. We expect this to take around 15 minutes, leaving us around 45 minutes for the Q&A session. We will look to end the call by 5:00 p.m. Before we get started with the presentation, I would like to draw your attention to the safe harbor statement included in the presentation for good order sake. With that, over to you, Priya.

Good afternoon, everyone. Thank you for joining us on the call today. Welcome to the first earnings call of full year '26-'27. Let me begin with an update on the operating context, followed by key performance highlights. Subsequently, Niranjan will take you through the results and conclude with the outlook. The quarter was shaped by an increasingly uncertain global environment, characterized by geopolitical tensions, volatile commodity markets and currency fluctuations. Against this backdrop, India demonstrated notable resilience. The country entered this period with solid macroeconomic foundations, supported by the policy measures implemented through FY '26. During the quarter, coordinated fiscal and monetary policy actions helped to manage energy security, inflation and currency volatility. These interventions helped us to cushion the impact on households and business, adding macroeconomic stability. The FMCG demand environment remained stable during the quarter, reflecting the underlying strength of consumption. In this context, we delivered another quarter of progressively improving performance. Turnover for the quarter stood at INR 17,184 crores, with an underlying sales growth of 10%, driven equally by volume and price. This represents our highest growth in 13 quarters. It reflects the result of decisive actions taken to transform our portfolio, sharpen execution and strengthen market development. What is particularly encouraging is the consistency of progress. Our growth trajectory has strengthened from 3% in the first half of FY '26 to 10% in this quarter. Equally important is that this growth is competitive as we continue to gain turnover weighted market share. The combination of accelerating growth, healthy volume contribution and strengthening competitiveness reinforces our conviction that we are building a future-fit business for long-term growth. We have delivered this strong performance in a volatile environment with the resilience and agility. This was enabled by the competitive moats we have built over time. Let me touch on a few of them. First, our supply chain resilience proved to be a critical advantage. By harnessing the scale of our global procurement network, we ensured continuity of supplies without any disruption. Complementing this, our digitally powered agile R&D and flexible manufacturing capabilities helped us to maintain service levels throughout the quarter. Second, our portfolio strength was a key source of resilience, with 50 brands in 15 categories straddling across the price benefit pyramid, we are uniquely positioned to serve the diverse evolving needs of consumers. Given the strength of our brands and portfolio, we have been able to implement calibrated pricing by preserving our consumer franchise. Third, despite the cost pressures, we continue to invest behind our brands to support long-term growth. In June quarter, we stepped our A&P spends up sequentially to INR [ 16 57 ] crores, the highest in the last 11 quarters. Similarly, we continue to strengthen our omnichannel execution. Quick commerce continued to grow strong double digits, while in GT, we grew our distribution, led out of small towns and rural. Further, we continue to expand off-line expansion of our digital-first brands like Minimalist and Simple. And finally, our financial agility enabled us to balance near-term pressure with long-term value creation. Our rigorous savings program, coupled with disciplined P&L management, helped us manage the cost inflation and generate fuel for growth. Backed by a strong balance sheet and healthy cash generation, we continue to invest behind our brands, innovation and market-making capabilities. As we step up our performance, we are equally focused on building capabilities that will shape our next phase of growth. Our approach is to invest ahead of the curve, on innovation, technology, manufacturing, and digital transformation to ensure that we remain future fit and create desire at scale. A powerful example of this commitment is the launch of Unilever Fragrance House in India. It is a part of a global program to advance fragrance creation capabilities, both in-house and in partnership with key fragrance houses. It brings together the best of science, consumer insight and artificial intelligence close to one of the fastest-growing markets in the world. Our Liquid Lab of the Future in Mumbai is another such example. It is built with advanced AI and digitally enabled facilities to accelerate innovation in future-facing high-growth formats. This lab can accelerate formulation development time lines by up to 6x to respond with speed to consumer needs. In supply chain, we are continuing to raise the bar on manufacturing excellence. In this quarter, the Haridwar and Sonepat factories were recognized by the World Economic Forum, Global Lighthouse network in the supply chain resilience and sustainability categories, respectively. These recognitions reflect our ability to use advanced analytics and digital technologies to respond to changing demand conditions while reducing the environmental footprint. With these recognitions, HUL now holds 8 WAF Lighthouse designations across 6 sites, the highest for any company in India. And finally, we are embedding artificial intelligence across our value chain, not just as a stand-alone initiative, but as a core enabler of how we operate. An example of this is our digital first distribution center in [ Vijavada ], where AI-enabled real-time visibility creates a digitally orchestrated fulfillment ecosystem. It improves accuracy and transparency through faster demand sensing, warehouse operations, truck tracking and digital proof of delivery. This fits very well into the rapidly evolving retail landscape and allows us to serve consumers and customers better. Taken together, these investments are not only strengthening our capabilities for today, but also building the foundations for a sustained competitive and long-term value creation. While I have touched upon a few examples today, I really look forward to sharing more of our strategy at our Capital Markets Day in September. With this, let me hand over to Niranjan to talk you through the quarter results in detail.

Thank you, Priya, and good afternoon, everyone. I'll walk you through our quarter performance and then close with the outlook. As Priya mentioned earlier, we delivered a strong performance with a revenue growth of 10%, underpinned by UVG of 5%. We navigated external volatility through financial discipline across all the lines of P&L, delivering EBITDA margin of 23%, which was within the guided range. Absolute EBITDA grew 8% year-on-year to INR 3,947 crores, while profit after tax before exceptional items grew 9% year-on-year to INR 2,731 crores. The strong growth in EBITDA impact BI reflects the quality of our earnings and the resilience of our business. The reported profit after tax after exceptional items stood at INR 2,680 crores, declining 2% year-on-year due to one-off tax credit of INR 330 crores in the base period of June quarter '25. Adjusted for this, the profit after tax stands at 11% growth year-on-year basis. Moving to segment performance for the quarter. Home Care delivered 14% USG, driven by high single-digit UVG. This is its strongest performance in 3 years. Fabric Wash delivered a broad-based double-digit volume-led growth. Bars and powders sustained their step-up, while liquids grew competitively and accelerated its double-digit growth trajectory. Household Care also accelerated its performance, delivering double-digit USG and UVG. Vim liquid reported another quarter of double-digit growth, with market development actions continuing to increase penetration. Given the external volatility, we continue to see inflation in crude-linked derivatives and are taking calibrated price increases across the segment. Turning now to Beauty and Wellbeing. This has been a strong quarter, with the segment delivering 12% USG, driven by high single-digit UVG. Hair Care delivered another quarter of double-digit volume-led growth. Premium hair care, including future formats like hair mask and serums, continue to outperform, reinforcing the relevance of our propositions with consumers. We further strengthened our market leadership during the quarter. Skin Care and Colour Cosmetics grew high single digits, led by double-digit growth in premium skin care. Minimalist strengthened its double-digit growth trajectory. We have expanded the brand aggressively in off-line channels since the acquisition last year. During the quarter, Vaseline Gluta HYA franchise broadened its portfolio with the launch of smoothening body lotion, enabling category premiumization and deseasonalization. Health and well-being saw a soft quarter as we transition OZiva business towards emerging consumer demand spaces. We remain committed to investing behind the portfolio and are confident of its long-term growth potential. Turning now to Personal Care. The segment delivered 4% USG for the quarter, driven by price increases taken in response to continued palm oil inflation for the second consecutive year. Skin cleansing grew mid-single digit, driven by premium bars, such as Dove and Pears, delivering double-digit volume-led growth. Sustained market development efforts in Bodywash accelerated its double-digit growth trajectory, while strengthening its category leadership. Oral Care delivered mid-single-digit growth, premium innovations like Closeup White Now, Pepsodent Gum Care and Sensitive Care continued to gain traction, enhancing our presence in higher benefit demand spaces. Talking about Foods, the segment delivered a USG of 7%, driven by mid-single-digit UVG. Premium tea reported low single-digit UVG, while coffee delivered double-digit volume-led growth. Our ready-to-drink formats like [ Blue Gold ] continue to scale up, reinforcing the strength of our proposition in this space. Lifestyle Nutrition continued its momentum with double-digit growth in Horlicks and Boost both. The category reported its fifth consecutive quarter of positive UVG. During the quarter, Boost crossed the INR 1,000 crore annual turnover milestone, making it our 21st brand in our portfolio to be in the INR 1,000 crore plus club. The relaunched Horlicks Super Foods and RTD offerings continue to see positive traction, while Horlicks Biscuits continued its double-digit growth momentum as well. Packaged Foods delivered high single-digit growth, led by robust performance in Unilever Food Solutions, mayonnaise and international sauces. Kissan Chutney maintained encouraging momentum, and we expanded the portfolio with 2 new variants during the quarter. Now coming to our outlook. Indian economy continues to remain resilient and the global -- while the global external environment remains a little bit uncertain, and we continue to monitor the progress of monsoon, but we do see a stable continued stability in the FMCG demand space. Backed by the continued action on market development, channel expansion and portfolio transformation, we remain confident that FY '27 will be better than FY '26. While commodities and currencies remain elevated, our approach remains consistent and disciplined, driving structural savings, taking calibrated pricing actions and making judicious media investments. We, therefore, expect EBITDA margin to remain around the current guided range. Finally, our focus remains clear and unchanged, delivering competitive volume-led growth anchored to our key priorities. With this, we conclude our prepared remarks, and I'll now hand back to Yogesh to commence the Q&A session.

Thank you, Priya and Niranjan. With this, we will now move to Q&A. We request you to kindly restrict the number of questions to a maximum of 2 at a time. In case you have any further questions, please join the queue again. In addition to the audio, our participants have an option to post the questions through the web option on your screen. We will take those questions just before we end. With that, I will now hand the call back to Darwin to manage the next session for us.

[Operator Instructions] Our first question comes from the line of Manoj Menon with ICICI Securities.

Just 2 questions only. One, when I look at the outlook statement of last quarter versus the current quarter, we do find -- I don't think it's a subtle change, it's quite significant in opinion, wherein you stated last time that -- let's say, relative to navigate market or actually the et cetera, et cetera. Now actually stating that continue to monitor monsoons and geopolitics. Because, look, these 2 elements were definitely there a few months back as well. Is there a change in thought process, the confidence levels in terms of, let's say, how FY '27 should pan out, what you thought 3 months back versus today?

So Manoj, absolutely no change in what we said from last time. So we will continue to believe we are well positioned to navigate the volatility, whether it is in terms of our portfolio, procurement, supply chain savings. And similar to the way we have managed in June quarter going forward, we feel we are well placed. We are only cautioning for the economic scenario and how it might pan out. That remains volatile. We need to see how that pans out. We remain extremely confident in how we will be able to navigate.

That's fair. Secondly, just on the soaps business, if I'm looking -- if I'm to think about the, let's say, the drivers or the reasons for the mid-single-digit volume decline. Could you just help us understand -- is it how much is, let's say, the gram rate reduction headwind? Let's say, how much is the category growth aspect versus later what it was last year? And point number 3, market share.

So as far as soaps is concerned, Manoj, we have seen soaps category impacted by palm oil inflation continued for 2 years. So there is a price impact on the category as such. Having said that, what we are focused on, therefore, within this is to drive premiumization. And therefore, our Dove and Pears, if you look at it, has grown double digits, and has grown since last quarter and this quarter as well. Further, Bodywash also is continuing double digits as we are doing market development and expanding Bodywash, which is actually very low penetration as of now. But we lead the Bodywash category and continue to expand the category. So that is one side that we are leading on the premiumization and the format development that we are doing on the soap category. And on the other hand, obviously, we'll continue to look to drive the volumes upwards as we move forward.

Just double clicking on only one point and I'll come back in the queue. In your opinion -- the reason I was saying in your opinion because nowadays, given the channel complexity, market share, it's not that straightforward to calculate. In your opinion, your health shares in soaps -- or how that is more actually in the bar category?

Yes. I mean we don't talk about the competitiveness given that there are so many data points that actually travel across. But it's fair to say that it is an overall category picture, which is impacted by the palm oil inflation. And within that, if you have to see that the way we are growing the premium, which is Dove and Pears, that's definitely in the premium category ahead of the others.

Yes, Manoj, we don't guide, as you know, by segment. But at an overall level, we have continued to be competitive in the quarter and are winning turnover weighted market share.

The next question comes from the line of Mihir Shah with Nomura.

First question is a clarification on your statement of a stable demand environment expected in the outlook. So when you say that stable demand environment is expected, does it mean that one should see similar optical volume growth that is seen in 1Q? Or once you see it in conjuncture with the base of last year and see it on a 2-year CAGR basis because you have a flat volume in 2Q last year. So that was the first clarification.

Yes. I think we won't guide you into a quarter guidance, Mihir, as you can imagine. What we have guided for is that full year '27 will be ahead of full year '26, and we're retaining that guidance. And overall, we see demand continuing to be stable going into the quarter.

Yes. Like there was apprehension earlier that there could be inflation-led impact on the FMCG demand. And we are not seeing that at all. The consumption continues to be strong, and which is the reason for us to believe that to guide for a stable demand environment moving forward as well.

Understood. I think the -- to see it in that context will be much better. Secondly, on the commodity statement. When you say commodity volatility persists, would it be fair to assume that gross margins will continue to see sequential price pressure as price hikes that we see are lower than the cost inflation. You had indicated that cost inflation was closer to 10%, pricing inflation is closer to 5%. And maybe on the pricing growth as well, can one expected to inch up from these levels? Or there is any anniversarization that we should keep in mind when we think about pricing growth going forward?

So I think I'll tell you an overall future that the commodities continue to remain. You also know, continue to remain elevated even now. We've been very measured in terms of passing the price increase to the consumers as you saw. Equally, our leverage on the P&L and all the lines of P&L has still allowed us to deliver EBITDA within the guided range. And that gives us the confidence, along with the plans that we have, that with whatever little bit of inching of price or whatever judicious price you may have to take, even if it's far less than inflation, we'll be able to deliver EBITDA around the guided range. So I would not comment on the gross margin, but I would comment on the EBITDA because these are all the lines of P&L that we are leveraging.

Understood. If I may just put on the same lines, just ask you about how should we think about ad spend? And I understand the EBITDA comment that you made, we're seeing that it has been growing slower than the sales growth since the past few quarters. I did hear a previous comment on the absolute number on ad spend going up over the past couple of quarters. But when you see the growth rate in conjuncture with sales growth, it has been lower since quite -- it seems like some underinvesting is happening to maintain the margins. So wanted a quick comment on that, if you don't mind.

Yes. I think when you look at our ad spend, you also have to factor in, Mihir, the return on investments that we are getting. And we have a lot of AI-enabled return on marketing investment programs in place. That, along with our procurement leverage, given the inflationary conditions, are allowing us to get savings on our overall media cost. And this forms a significant -- so looking at it just a single like-to-like basis would not be strictly comparable. So that's the first thing I want to say. And also, the mix of marketing that we are doing by channel and all the work that we're doing on return on investment allow us to get much more efficiency behind our media spend. Niranjan, anything you want to add?

Absolutely. And when we look at -- the best way to look at A&P also is that how is our competitive spend on the GRP levels. And actually, that has been going up. So that, therefore, when you look at the SOV SOM that have been going up and we are #1 in most of the categories, so the absolute spend size become sizable. And which is why we highlighted that on an absolute level, this is the highest in the last 11, 12 quarters of the A&P spend that we have done.

Our next question comes from the line of Aditya Soman with CLSA.

So 2 questions from me. Firstly, I think from your results, it seems evident that there's sort of a [ K-shape ] growth pattern where the mass categories and mass segments seem to be growing slower, whereas the sort of more premium categories are growing faster. So from your perspective, is this -- first, is this assertion true? And second, I then -- are you making a concerted effort in sort of playing this trend? And secondly, if you can just comment on how sort of general trade and rural growth has done this quarter and what your outlook on that is, maybe for the rest of the year?

Yes, I can start, and then Niranjan can add. So firstly, our mass growths are not behind, and it's not -- so at a total organization level, I mean, if you start looking at a subsegment level, you may find some differences in some categories. But at a total level, we continue to see competitive growth in mass as we see competitive growth in premium. And of course, in India, you are at higher growth rates in some of the premium subsegments, that indeed is the case and the shape of the market. But the first thing I want to -- because it sounds like you're suggesting that we are pushing towards only premium growth. So I want to correct that notion and say we continue to be competitive. It's very important given our scale for us to continue to be competitive at the mass end of the portfolio and this is the reason why we have a large volumetric base, while continuing to drive premiumization in line with the trend line of the market. So that's the first thing I would say to you. And Niranjan, anything you want to add on that?

No. That's perfect.

Yes. And the second thing in terms of rural versus urban growth for us, both rural and urban growth have been robust and continue to be strong. So therefore, in fact, in the last few quarters, we have seen a step up in our rural growth and therefore, that's been the big change and driver for us over the last few quarters. But demand overall continues to be stable, both in rural and in urban. So I hope that answers the question.

Yes, yes, it does. I mean, just one follow-up on that. I mean, I totally understand. I didn't mean that you're sort of opportunities are lower, I just meant -- wanted to ask if the growth for premium is faster. And in that context, since you mentioned rural growing faster, so even there, this trend would hold true, right, of premiumization and the premium category is generally growing faster?

Absolutely. Across pop strata in the country today, consumer products tend to be in that direction over time. And we have a portfolio. The thing I want to clarify is it's not just about -- I wanted to underline the importance of our mass business for us. So we are -- have leadership because we have the portfolio we have with strategies across the price piano, and winning at each end of this market is very important. And that's the shape of growth that we're looking for is competitive growth at each end of the pyramid. And of course, the premium segment grows faster. So I hope that clarifies.

Yes, it does.

Our next question comes from the line of Nihal Jham with HSBC.

Am I audible?

Yes, you are.

I had 3 questions. We'll quickly take them. The first is, if I look at our Q1 volume growth of 5 versus 6 in Q4, fair to say that it's mainly the moderation in tea volumes and soaps, which sort of explains this deceleration, right? And all the other subsegments would have seen a pickup in volume growth?

Yes, from a trajectory perspective, yes.

That's helpful. The second one, Priya and Niranjan, was, say, on the El Niño impact. I know you've called that out, historically, when we've also seen the performance in, say, years when El Niño has been extremely strong. But we've not seen that much of an impact in terms of how our overall top line or volume growth would have been impacted. So it is fair to say that irrespective of how the El Niño impact sort of plays out there, wouldn't be much of an impact on the growth is what we are thinking at this point in time?

Yes. I mean I'll just give you some statistics and maybe that helps. Overall, I mean, listen, you guys will know this, but agriculture is now 15% of the GDP of India. And in a difficult year versus a good year, the impact will be 50, 60 basis points to overall GDP growth. Within that, our portfolio, because of the spread both across categories and the depth in each subsegment, we feel very confident that we can navigate. So -- which is why we are not guiding differently.

Yes. And if I were to just build on Priya's point, the added thing is that while that's the quantum impact that happens, there's also been MSP increases that have happened around 5% to 6%. So therefore, in a sense, there is some sort of insulation to an extent on the rural income part of it. And therefore -- and plus, when you see the rainfall progression as of now, because this monsoon is important. It started with a huge deficit, but now it has now actually increased, and therefore, the deficit is now only 15% of the overall. Now as long as the deficit remains between 15% to 20%, we do not see any meaningful impact on the Indian economy.

Got that, Niranjan. Just one final question is on OZiva. Looking at FY '26, the performance was very strong at I think at an 80% kind of growth the first full year when you were operating it. In Q1, when you're calling out the moderation, any specific aspects about what changes are we making that the growth has sort of moderated?

No. Listen, in these kind of categories, growth doesn't tend to be linear, right? These are small businesses moving at -- sometimes at very high velocity. We just need to keep driving that curve of growth and innovation. We are -- we remain extremely bullish on the opportunity in wellness, and we will roll out a spate of innovations as we go forward to keep driving the wellness category. So at a very early stage, super nascent, right, the wellness category in India. So I think we've had a huge inflection since acquisition, and this is an area in which we don't expect linear growth, to be honest.

Ladies and gentlemen, I would now like to hand the conference over to Mr. Yogesh Mulgaonkar to take up questions from the web. Over to you, sir.