HUL – 2020 Annual Report Important Takeaways

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HUL 2020 Annual Report Key Takeaways
Source: HUL Annual Report

Overview of HUL – Hindustan Unilever Limited

Hindustan Unilever Limited (HUL) is India’s largest fast-moving consumer goods Company with a heritage of over 80 years. More than nine out of ten Indian households use one or more of our brands to feel good, look good, and get more out of life, giving us a unique opportunity to build a brighter future.

Brands under HUL

The portfolio includes leading brands such as Surf Excel, Rin, Wheel, Sunlight, Vim, Pureit, Lux, Lifebuoy, Dove, Fair & Lovely, Pond’s, Vaseline, Clinic Plus, Sunsilk, Indulekha, Lakmé, Pepsodent, Closeup, Axe, Brooke Bond, Lipton, BRU, Kwality Wall’s, Knorr and Kissan.

Effective 1st April 2020, after the merger of the business of GlaxoSmithKline Consumer Healthcare Limited (GSK CH), has also acquired iconic brands like Horlicks and Boost, amongst others.

Financial Overview of HUL

HUL Financial Overview

HUL Chairman’s Message

Given the disruptions to the supply chain arising from COVID-19 in March 2020, for the full year 2019-20, Domestic Consumer Growth was 2% with the Underlying Volume Growth of 2%.

Our EBITDA margin improved by 100 bps on a comparable basis, PAT, which grew by 11% to Rs. 6,743 crores and PAT at ` 6,738 crores was up by 12%. We sustained our track record of strong cash generation.

We delivered EBITDA of Rs 9,600 crores, our EBITDA margins are at its highest ever at 25.1% and our profit crossed the Rs 6,700 mark for the first time.

With on-trend innovations such as Matte revolution and 3D makeup, Lakmé continued to be India’s No. 1 Cosmetics brand.

To strengthen our premium portfolio further, we launched ‘Love & Care’, an expert Fabric Solutions brand.

During the year, we also launched, a purpose-driven brand from Unilever stable, ‘Love, Beauty and Planet’ – made from sustainably sourced ingredients and packaged in recycled plastic.

Industry Overview

In the last quarter of the financial year 2019-20, we have seen an unprecedented global breakout of the COVID-19 pandemic leading to a humanitarian crisis, lockdown across many countries, and a significant economic fallout.

Around the world, growth has decelerated markedly. In India, the economic impact of COVID-19 is trickling in on the backdrop of an already challenging macro-economic environment.

In 2019, we also witnessed some weather disruptions in the form of late-onset of monsoon in parts of the country, post-monsoon heavy showers, and a delayed winter.

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Global trade dynamics, volatile commodity cycles, and climate concerns continue to increase the uncertainty further.

Conditions like these create challenges for companies and categories across the spectrum.

On the other hand, new technologies are changing the landscape of the consumer goods market, bringing opportunities for brands and consumers alike.

Consumers are shopping through more diverse channels and smaller local brands as well as digital-first brands are increasingly entering the market.

Digital and Technological Revolution

Technology continues to change the fabric of life and business. Enhanced Artificial Intelligence (AI), robotics, and the Internet of Things (IoT) are reshaping how people live, work, and interact with the world and with brands.

Intelligent technologies are optimizing manufacturing and agriculture, connecting businesses inside and out, and changing how people shop.

What HUL is doing on Digital space

With our agenda of ‘Reimagining HUL’, we are well poised to unlock the opportunities created by the digital and technological revolution. Under this digital transformation program, we are embedding technology across our end-to-end value chain to build a business that is ‘Future-fit’.

Social Development at HUL

Societies are becoming more diverse and fragmented. We are seeing, for example, growing splits between generations, rising affluence in the middle-income tier, growing young and working population, and changing family structures.

As people increasingly interact with each other and with businesses online, consumers are making more decisions based on their values. Digitally connected shoppers are over-indexed on consumption across all categories and especially in niche categories.

They are also using both online and offline channels to find better, more personalized products and services more easily and quickly.

What HUL is doing in this space?

The company is focused on creating an end-to-end solution for a seamless experience and route-to-market disruption Underpinned by our Compass belief that brands with purpose grow, our brands are on a journey of becoming purposeful such as Lifebuoy preventing life-threatening diseases, Domex improving sanitation, Red Label promoting inclusivity and togetherness and Wheel empowering women.

This enables our brands to connect with consumers at a deeper emotional level.

COVID Impact on HUL

The beginning of 2020 has witnessed the global spread of COVID-19, i.e. coronavirus. The global threat from COVID-19 is continuing to grow, and at a rapidly accelerating rate.

Governments in many countries announced lockdowns and asked people to stay indoors.

Around the world, these coronavirus lockdowns have driven professional and social life out of the physical world and into the virtual realm. The economic fallouts of this are still difficult to assess as the situation is still evolving.

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HUL Response

In these unprecedented times, we are falling back on the fundamentals to drive agility and responsiveness across our value chain.

We have structured our response around five key imperatives, drawing strength from our values and guiding our strategic framework.

The five workstreams that are serving as a foundation of our business and serving our multiple stakeholders during this crisis are – People, Supply, Demand, Community, and Cost & Cash.

Also Watch: HUL Success Story

HUL’s Multi-Stakeholder Model

The management has identified six stakeholder groups critical to our future success: consumers, our people, society (including suppliers), the planet, customers, and shareholders.

This stakeholder review provides an overview of how we have created value for our stakeholders and some of the benefits we have gained as a business by nurturing these vital relationships.

Major Risks and Mitigations at HUL

HUL’s appetite for risk is driven by the following:

  • Our growth should be consistent, competitive, profitable, and responsible.
  • Our actions on issues such as plastic and climate change must reflect their urgency, and not be constrained by the uncertainty of potential impacts.
  • Our behaviors must be in line with our Code of Business Principles and Code Policies.
  • Our ambition should be to continuously improve our operational efficiency and effectiveness.

Risk: Global and local macro-economic factors

Mitigation: HUL’s flexible business model allows us to adapt our portfolio and respond quickly to develop new offerings that suit consumers’ and customers’ changing needs during economic downturns.

We regularly update our forecast of business results and cash flows and, where necessary, rebalance investment priorities.

We believe that many years of exposure to challenging markets have given us the experience of operating and developing our business successfully during periods of macro-economic volatility.

Risk: Climate changes

Mitigation: We have ongoing plans to de-seasonalise our product portfolios. Water-saving formulations are being made available for seasonal deployment across portfolios.

We monitor trends in raw material availability and pricing due to short-term weather impacts, and proactively reformulate our products where appropriate to ensure continued availability of input materials.

We monitor Governmental developments around actions to combat climate change and take proactive action to minimize the impact on our operations.

Risk: Supply Chain

Mitigation: We have contingency plans designed to enable us to secure alternative key material supplies at short notice, to transfer or share production between manufacturing sites, and to use substitute materials in our product formulations and recipes.

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We have policies and procedures designed to ensure the health and safety of our employees and the products in our facilities and to deal with major incidents including business continuity and disaster recovery.

Commodity price risk is actively managed through forward buying of traded commodities and other hedging mechanisms.

Trends are monitored and modeled regularly and integrated into our forecasting process.

As the COVID-19 virus spreads across the nation, our Supply Chain teams have risen to the challenge. We are working tirelessly to keep our production and distribution ongoing so that our consumers and communities have uninterrupted access to our products which help them meet their basic needs of health, hygiene, and nutrition.

We are working closely with the Government to provide necessary hygiene solutions, we are prioritizing key SKUs, and are continuously making our planning cycles more agile while unlocking flexible alternatives.

This has helped us reboot our supply lines to a large extent. Your Company has enhanced its production capacities of home and hygiene products in keeping with consumer needs in these times.

Consolidated Balance Sheet

Consolidated P&L

Consolidated Cash Flow Statement

Economic Value Added

That’s all for now. Hope you enjoyed reading it.

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Disclaimer: The above content is only for educational purposes and not a recommendation. Do your own research or reach out to your financial advisor before making any investment decisions.

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