School of Business, Public Policy and Social Entrepreneurship
Qualitative Analysis Of Hindustan Unilever Limited
Under the guidance ofSubmitted by :Mr Saurabh MithalAmrita Arora S143F0005School of Business, Public Policy & Social Entrepreneurship (SBPPSE)Ambedkar University Delhi (AUD)HINDUSTAN UNILEVER LIMITEDPurposeHindustan Unilever Limited is a company which puts its stakeholders first and visions for a better tomorrow. Keeping this in mind, the company has rightly titled its Annual Report for the financial year 2013-2014 as Making Sustainable Living A Commonplace.
Following the stakeholder approach, the company has listed its priorities in its purpose: Consumers Customers Employees Suppliers Communities
They believe that if the responsibilities towards all the above mentioned stakeholders are fulfilled, then shareholders will be automatically rewarded.With this visionary purpose, Hindustan Unilever Limited has presented its Annual Report 2013-14 to all its stakeholders.
THE ANNUAL REPORTThe Annual Report 2013-2014, presented by Hindustan Unilever Limited is divided into four parts:I. OverviewII. ReportsIII. Financial StatementsIV. Shareholder InformationBy analyzing each of these parts in detail, Ill present the Qualitative Analysis of Hindustan Unilever Limited.
QUALITATIVE ANALYSIS Hindustan Unilever At A GlanceHindustan Unilever Limited is the market leader amongst FMCG companies in India with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products like the following:
Though Financial Year 2013-14, was surrounded by a challenging environment like political instability in India, the company has shown growth and margin improvement by focusing on two key areas: Innovation Operational EfficiencyGrowth has been observed in terms of: Consumer Base Operating Margin Cash Generation and DividendsThis is a good factor for the company as well as the economy as a whole.Segmental Performance The segmental performance depicted in the above two doughnut graphs shows that although maximum percentage of revenue to the company comes from Soaps and Detergents (49%), maximum share in profits (46.4%) is contributed by the Personal Products segment of HUL which generates only 29.1% in terms of revenue.This shows that Personal Products is the best performing segment of HUL followed by Soaps and Detergents. Key Performance Indicators Non Financial IndicatorsThe non- financial indicators reflect the companys aim of making sustainable living a commonplace.For this, the company is taking care of environment via 27% reduction in CO2 per ton of production 37% reduction in water use indicating use of water saving techniques and policies Around 84% reduction in waste per ton of productionOther measures taken by the company in this direction are shown in the following figures:
These measures indicate that the company is while increasing its own performance; the company is also working for the upliftment of society as a whole.
CSR Initiatives at HULHUL's key CSR initiatives are undertaken with a long-term view. Initiatives that are sustainable, that have long-term benefits and that have business linkage are accorded priority. Some initiatives are brand driven, some are driven by their people and some are driven by their processes.
On the social front, HUL works in areas ofHealth & NutritionandEmpowerment of Women, with economic agenda driven towardsEnhancing Livelihoodsand the environmental agenda focused onWater Conservationand cuttingGreen House Gases. HUL has developed specific programs and initiatives to address each of these.
Project Shakti It is an initiative towards changing lives of women in rural India. Similarly, to commemorate their 75th year in India, HUL had decided to undertake some key initiatives. They have enhanced livelihoods of 75,000 women in a sustainable manner and also intend to partner with NGOs to augment their efforts by bringing in technical and managerial expertise in this area.
SamruddhiFor Enhancing Livelihood, HUL in partnership with Aide et Action India Private Limited has established the Livelihood Education and Skill Development project called Samruddhi (meaning prosperity) for the youth through Institute for Livelihood Education and Development (iLEAD) Centre in Silvassa.
Reducing Carbon FootprintOne of the other key initiatives is built around HULs commitment of reducing their carbon footprint. They have embraced Unilever's ambitious target of 25% reduction in CO2 from energy in manufacturing operations per tonne of production by 2012, against a baseline of 2004. HUL developed a new process of manufacturing soap based on 'Plough Share Mixer' technology. This eliminates the need for steam in soap making. Since soaps are a sizeable part of their business, the new technology cuts carbon emissions by 15,000 tons per year. Financial IndicatorsThe good financial performance of HUL is indicated through following financial indicators, ratios and trends:
Major Financial Indicators
Net RevenueThe net revenue of HUL for the year 2013-14 had been Rs. 28,019 crores. This had been due to an increase in customer base and an increase in volumes. Operating ProfitHUL had an operating profit of Rs.4215 crores in the financial year 2013-14. This grew by 12% as compared to previous year which shows that the company had used cost effective techniques in day to day activities. Cash from OperationsA Rs. 5000+ crores cash from operations of HUL indicates a good financial health of the company because operating cash flow is the lifeblood of a company. Fixed AssetsAn increase in Fixed Assets by Rs. 233.3 crores indicates the growth of the firm for which new assets have been added to the firms existing assets. InvestmentsAn increase in investments by Rs. 763.46 crores indicates an increase in productive capacity of the company (HUL). Reserves and SurplusAn increase in Reserves and Surplus indicates that even after distributing dividends, HUL is saving a good amount of its net income for further growth opportunities HUL Share Price on BSEThe share price of HUL on BSE also increased in 2013-14 by Rs. 137.55 is also an indicator of good financial health of the company. Economic Value AddedAn increase in Economic Value added means an increase in economic profit of the company indicating god financial health of HUL. Market CapitalizationIncrease in market capitalization of HUL of around Rs. 30,000 crores indicates an increase in share price of the company. It is a good sign for the capital market.
Key Ratios EBIT as % of Sales 14.6%This indicates that Earnings before Interest and taxes form 14.6% of the sales. Fixed Asset Turnover- 10.6 timesThis indicates the companys sales are 10.6 times its fixed assets PAT/Sales- 12.3%The net profit ratio indicates 12.3% profit as a percentage of sales. Return on Capital Employed- 130.2%This ratio indicates 130.2% return on net capital employed ( debt + equity) Return on Net Worth- 104.1%This ratio indicates a return of 104.1% on the net worth of the company.
All these ratios indicate good financial position of the compsny.
Performance TrendsGood financial position of HUL is also indicated by the following performance trends.
Chairmans MessageHarish Manwani, the chairman of HUL talked about the success of the company in financial year 2013-14.Despite various challenges and changing market conditions, HUL performed exceptionally well, rather, ahead of the industry. He also talked about segment wise performance, social responsibility initiatives, new innovations, brand development strategies and change in companys leadership.An important announcement in the report being increase in Unilevers share in HUL as a response to promising and growing Indian market in FMCG products.In the end, he thanked the shareholders for their trust and confidence in the company.
Directors Report and Management Discussion and AnalysisThese reports talked about the dividends declared- both final and interim, audited accounts according to the rules and regulations ( accounting standards).They also explained the economic scenario- international (US, Europe, etc.) and Domestic and performance of business in various categories like home and personal care, soaps and detergents, foods and beverages, etc., FMCG exports, supply chain, customer development, research and development, environment, safety and health concerns, human resources, information technology etc.
CONCLUSIONHUL is a good company to invest in, to be a customer for and to work with. It is an innovative firm with sustainable living as a long term objective.