Understanding Hindustan Unilever

Understanding Hindustan Unilever:

  • In HUL, though major revenue comes from ‘Soaps & Detergent’ segment but major profit come from ‘Personal care’ segment. Combined both accounts for 75+% of revenue and 85+% of EBIT. Beverages and Packaged foods are smaller segments.
  • Segment Capital Employed in Soaps and Personal care segment is negative. Its a debt free company, good amount of financing comes from creditors. On account of recent acquisition of Indulekha brand, personal care segment’s capital employed turned positive.
  • Around 30% of Company’s sales comes from trading in goods.
  • During last considerable number of quarters, volume growth is falling and finally turned negative. Gross margins  (average 43%) have also fallen steeply.
  • Company is now incurring more Advertising and selling expenses to boost sales (accounts around 23% of sales).
  • Most of the cash generated from operation gets paid out as dividend and only a small amount is invested in fixed assets. Most of the investment in fixed asset is met through other income and investments.
  • Company generates sales  more than 8 times  times of Shareholders funds and has maintains Net profit margin of 12+%, producing ROE around 100%. This is more due to support by creditors for goods. Cash conversion cycle is negative and increasing for company’s benefit.
  • PFAD (Palm Fatty Acid Distillate), LAB (Linear Alkyl Benzene) and Crude derivatives are HUL’s key raw materials.



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