hul-annual-report-2018-19_tcm1255-537453_1_en.pdf - MAKING SUSTAINABLE LIVING COMMONPLACE ANNUAL REPORT 2018-19 BASIS OF PREPARATION AND PRESENTATION

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Unformatted text preview: MAKING SUSTAINABLE LIVING COMMONPLACE ANNUAL REPORT 2018-19 BASIS OF PREPARATION AND PRESENTATION Summary Cautionary Statement The terms ‘HUL’, ‘the Company’, ‘your Company’, ‘we’, ‘our’ and ‘us’ refer to Hindustan Unilever Limited. Our Integrated Annual Report encompasses the Strategic Reports, pages 2 to 80 and the Financial Statements, pages 81 to 201. The Strategic Report contains information about us, how we create value for our stakeholders and how we run our business. It also includes our strategy, business model, market outlook and key performance indicators. The Report of Board of Directors and Management Discussion and Analysis includes details of our performance under each of the strategic pillars as well as our approach to sustainability and risk management. Our Corporate Governance Report, which forms a part of the Board of Directors Report, pages 55 to 80, contains an analysis of steps taken in the area of Corporate Governance including information as required under the Securities and Exchange Board of India (SEBI), (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). Our Financial Statements and Notes are on pages 81 to 201. Our Integrated Annual Report has been approved by the Board of Directors. The Notice of Annual General Meeting forms part of this report. Statements in this Integrated Annual Report, particularly those that relate to Management Discussion and Analysis, describing the Company’s objectives, projections, estimates and expectations, may constitute ‘forward-looking statements’ within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ. Standards & Frameworks The Company has obtained Certificate from B S R Co. & LLP, Statutory Auditors confirming the compliance of conditions of Corporate Governance as stipulated under Listing Regulations and Cerificate from S. N. Ananthasubramanian & Co., Company Secretaries confirming compliance with the Companies Act, 2013, applicable Rules made under the Act, Listing Regulations issued by SEBI. The Certificates form part of this Report. The Integrated Annual Report is prepared in accordance with the guiding principles of the Integrated Reporting (IR) Framework recommended by International Integrated Reporting Council (IIRC). Statutory Reports, including the Report of Board of Directors, Management Discussion and Analysis (MD&A) and the Corporate Governance Report, are as per the regulatory requirements mandated by the Companies Act, 2013, Listing Regulations and the Secretarial Standards. Reporting Scope The Integrated Annual Report including the Strategic Report and the Financial Statements provides information with respect to Company’s operations for the financial year 2018-19 (unless specifically mentioned otherwise). Assurance by Independent Auditor The enclosed standalone and consolidated Financial Statements of your Company have been audited by Independent Auditors B S R & Co. LLP Chartered Accountants. Your Company’s USLP performance is a subset of the Unilever PLC’s reported USLP performance. Independent assurance has been provided by PricewaterhouseCoopers LLP over the Unilever PLC aggregated USLP and Environmental and Occupational Safety performance indicators; details of which are provided online at Materiality Determination This Report provides fair and balanced information about the relevant matters that substantively affect your Company’s ability to create value both positively and negatively, including risks, opportunities and favourable & unfavourable performance or prospects. To identify the material information or matters, your Company has taken a holistic perspective by regularly engaging with the various key stakeholders. Accountability Statement The Company’s Board of Directors confirm that the HUL Integrated Annual Report, taken as a whole, is true, fair, balanced and provides necessary information to shareholders on the Company’s performance, business model and strategy together with a description of the material risks and opportunities. ONLINE You can find more information about Hindustan Unilever Limited at For further information on the Unilever Sustainable Living Plan (USLP) visit Annual Report 2018-19 along with other related documents can be downloaded at Hindustan Unilever Limited Annual Report 2018-19 INTEGRATED ANNUAL REPORT 2018-19 CONTENTS OVERVIEW About Us..................................................................................2 Chairman’s Statement ............................................................3 Board of Directors...................................................................4 Management Committee ........................................................5 Our Performance ....................................................................6 Financial Performance .....................................................7 Unilever Sustainable Living Plan ......................................8 The Changing World................................................................9 Our Value Creation Model .....................................................10 Our Strategy ..........................................................................11 REPORTS Report of Board of Directors and Management Discussion and Analysis ..........................................................................13 Annual Report on Corporate Social Responsibility ..........40 Business Responsibility Report ........................................45 Corporate Governance Report ..............................................55 Secretarial Audit Report .......................................................78 FINANCIAL STATEMENTS Standalone Financial Statements Economic Value Added .........................................................81 Independent Auditors’ Report...............................................83 Balance Sheet .......................................................................91 Statement of Profit and Loss ................................................93 Statement of Changes in Equity ...........................................95 Statement of Cash Flows ......................................................96 Notes .....................................................................................98 Consolidated Financial Statements Independent Auditors’ Report.............................................143 Consolidated Balance Sheet...............................................149 Consolidated Statement of Profit and Loss........................151 Consolidated Statement of Changes in Equity ...................153 Consolidated Statement of Cash Flows .............................155 Notes ...................................................................................157 Form AOC - 1 ......................................................................201 OTHERS Awards and Recognition .....................................................202 Corporate Information ........................................................203 Notice of Annual General Meeting ....................................204 Profile of Directors.............................................................212 Proxy Form Annual Report 2018-19 Hindustan Unilever Limited 2 ABOUT US AT A GLANCE HINDUSTAN UNILEVER LIMITED IS INDIA’S LARGEST FASTMOVING CONSUMER GOODS (FMCG) COMPANY WITH A HISTORICAL PRESENCE IN INDIA OF OVER 80 YEARS. 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 CONTRIBUTE TOWARDS A BRIGHTER FUTURE FOR OUR CUSTOMERS AND CONSUMERS. Each of our divisions – Home Care, Beauty & Personal Care and Foods and Refreshment – include a portfolio of brands that serve consumers across the length and breadth of India. With over 40 brands across 12 distinct categories including Fabric Wash, Household Care, Purifiers, Personal Wash, Skin Care, Hair Care, Colour Cosmetics, Oral Care, Deodorants, Beverages, Ice Cream & Frozen Desserts and Foods, the Company is part of the daily life of millions of consumers. Our 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, BRU, Kwality Wall’s, Knorr and Kissan. Our products are available in over eight million outlets across India. Your Company has around 18,000 employees working across 28 Company owned factories and nine offices. More than 1,000 suppliers work with the Company’s supply chain spanning own factories and several others that manufacture on the Company’s behalf. The products are stocked in warehouses dotted across the country and delivered to over 3,500 distributors. Your Company also creates employment opportunities for several thousand more across its value chain – from smallholder farmers who provide raw materials, to the distribution partners who take our products to customers and consumers. Your Company has a clear and compelling strategy that is driven by purpose and focuses on achieving consistent, competitive, profitable and responsible growth. Our strategy focuses on Winning with Brands and Innovation, Winning in the Marketplace, Winning through Continuous Improvement and Winning with People. This is underpinned by the Unilever Sustainable Living Plan (USLP) that sets our vision to increase the size of the business, whilst decoupling it from our environmental footprint and increasing our positive social impact. In a volatile and uncertain world, where rapid digitisation is re-shaping established business models, your Company is re-imagining itself to stay ahead. We are embedding technology across all our processes to build a business that is future-fit. We are constantly innovating across the portfolio to meet evolving consumer needs. We are focusing on building the e-commerce channel that is growing fast and driving profitability for the business. At the same time, transformation programmes such as ‘Winning In Many Indias’ (WiMi) and Connected 4 Growth (C4G) are helping in faster decision-making, localised and swifter innovation delivery and increased speed-to-market, which is driving business performance. Hindustan Unilever Limited Annual Report 2018-19 We are committed to protecting our reputation by fostering business integrity which is non-negotiable for all employees. Our Code of Business Principles (the Code), and the 24 policies that support it (Code Policies), set out the behaviour standards required from all our people. The Code Policies cover a number of areas, including anti-bribery and corruption, respect, dignity and fair treatment of people and personal data and privacy. Together, the Code and Code Policies help us put our values of Integrity, Respect, Responsibility and Pioneering into practice. OUR PURPOSE HINDUSTAN UNILEVER LIMITED HAS A CLEAR PURPOSE – TO MAKE SUSTAINABLE LIVING COMMONPLACE. WE BELIEVE THIS IS THE BEST WAY TO DELIVER LONG-TERM SUSTAINABLE GROWTH. We are well placed to deliver long-term value through our strategy and the Unilever Sustainable Living Plan (USLP). Our commitment to the USLP’s three big global goals of improving health and well-being of more than one billion people by 2020, halving our environmental footprint by 2030, and enhancing livelihoods for millions across the globe by 2020 has delivered responsible growth for the business. The success of our sustainable living brands is driven by the growing consumer demand for brands that have purpose at their core, substantiating our belief that ‘Brands with Purpose’ grow. We have launched numerous initiatives to improve hygiene and access to sanitation across India. We are creating thousands of job opportunities in remote villages, especially for women. We have also set up a system of waste management to curb plastic waste from polluting the oceans. With our partners, we are working towards innovative solutions to help address the challenge of plastic waste in India. Your Company has made clear commitments to make 100% of our plastic packaging reusable, recyclable or compostable by 2025. Further, 25% of all the plastic we use is expected to come from recycled sources by 2025. To address the challenge of depleting water resources, in 2010, we created a not-for-profit organisation, Hindustan Unilever Foundation (HUF), which along with its partners, creates water conservation potential and enhances water dependent livelihoods. The HUF supports programmes focussed on water conservation, community-based governance of water resources and efficient use of water in agriculture. HUF’s water saving initiatives have created capacity to conserve over 700 billion litres of water. Till financial year 2018-19, HUF’s water conservation capacity stood at 900 billion litres* cumulatively. Through HUF, we also support knowledge initiatives in the area of water. ◊ Find out more about our performance under the USLP on pages 8 and 40 to 44. *pending independent assurance Overview Reports Financial Statements 3 CHAIRMAN’S STATEMENT and broad-based volume-led growth across Tea, Coffee, Ice Creams and Frozen Desserts backed by successful innovations. During the year, we acquired Adityaa Milk to expand our ice creams business. This acquisition will also enable us to pilot low-cost business models and enhance our ice cream supply chain and ‘go to market’ capabilities. As you are aware, last year we also proposed a merger of GlaxoSmithKline Consumer Healthcare (GSK CH) business into HUL, subject to obtaining requisite approvals. This is in line with our ambition to build one of the largest Foods & Refreshment businesses in the country. GSK CH India is the market leader in the Health Food Drinks category, with iconic brands such as Horlicks and Boost. The amalgamation of the two Companies - the combined knowledge and the strong portfolio, will give us a strong competitive edge. Dear Shareholders, I am pleased to share with you an update on your Company’s performance for 2018-19; a year which has seen remarkable all-round progress. The FMCG opportunity in India continues to remain very attractive, bolstered by ongoing structural reforms such as the Goods and Services Tax. Our deep understanding of consumers, a strong portfolio of brands and distinctive capabilities across the value chain have enabled us to deliver broad-based superior performance across all our Divisions. We continue to place purpose at the heart of our business as we believe that brands with purpose grow, companies with purpose last and people with purpose thrive. I am delighted that the year has been a testament to the fact that embedding purpose in the business, drives superior performance. In the year under review, we crossed several milestones. We delivered over ` 8,500 crores of EBITDA, our EBITDA margins are at its highest ever at 22.9% and our profit crossed the ` 6,000 crore mark for the first time. Our Domestic Consumer business on comparable* basis, grew by 12% with 10% Underlying Volume Growth and Comparable* EBITDA margin improvement was 130 bps. Profit after tax before exceptional items, PAT (bei), grew by 18% to ` 6,080 crores and Net Profit at ` 6,036 crores was up by 15%. Our strong track record of cash generation was sustained. The Board of Directors have proposed a final dividend of ` 13 per share, subject to the approval of the shareholders at the Annual General Meeting. Together with the interim dividend of ` 9 per share, the total dividend for the financial year ending 31st March, 2019 amounts to ` 22 per share. In Beauty & Personal Care, the growth was driven by focusing on strengthening core brands, accelerating premiumisation of the portfolio, entering new segments and scaling up our play in naturals. Growth in Skin Care was driven by good momentum led by Fair & Lovely and Pond’s. In Skin Cleansing, premium brands such as Dove and Pears delivered a strong performance. In Haircare, your Company saw robust growth in TRESemmé, Dove and Indulekha. During the year, Dove became India’s No. 1 Haircare brand. Lakmé continued its dream run, growing across the portfolio with consumer-focussed innovations. The Home Care business continued its strong volume-driven profitable growth during the year. The Fabric Wash business delivered exceptional performance on the back of continuing premiumisation with Surf excel and Rin, whilst growing the mass segment led by Wheel. During the year, flexible packs were introduced in detergent liquids and fabric conditioners to make them more affordable for consumers and further drive consumption and penetration. The Foods & Refreshment division delivered strong growth across categories. In Foods, we continued to grow steadily in the core portfolio of Jams and Ketchups while investing in market development to drive penetration in nascent categories. In Refreshment, we delivered strong Our brands continued to live our purpose of making sustainable living commonplace. Brands such as Lifebuoy, Domex and Pureit with their initiatives in the areas of hygiene, sanitation and safe drinking water, have cumulatively reached over 150 million people across the country. Recognising the significant role we can play in driving behaviour change in communities, we launched the campaign, ‘Start a Little Good’. Through this initiative, we urged consumers to take small actions in the areas of water conservation, plastic waste management, and teaching good hygiene habits. Our brands such as Surf excel, Brooke Bond Red Label and Hamam continued to drive positive social change through their purpose-driven and impactful advertising. We remain committed to Unilever Sustainable Living Plan’s (USLP) vision of reducing our environmental footprint and at the same time, creating a positive social impact. During the year, we took significant steps to further reduce waste, water consumption, energy usage and CO2 emissions in our factories and offices. We increased the renewable energy share in our manufacturing to 43%. To address the challenges of depleting water resources, Hindustan Unilever Foundation, along with its partners, has created a cumulative water conservation potential of over 700 billion litres. During the year, your Company, along with its partner, has been able to process approximately 15,000 tonnes of plastic waste and convert it into electricity. In addition to this, approximately 5,000 tonnes of post-consumer use plastic waste was collected with the help of NGOs and disposed safely. Your Company continued to focus and drive ‘Project Shakti’, aimed at providing livelihood opportunities as micro-entrepreneurs in rural India. Your Company now has more than one lakh Women Shakti Entrepreneurs across the country, who make a living by distributing HUL products. Our world-class supply chain maintained its relentless focus on driving quality, customer service and cost effectiveness across the value chain. Our belief remains firmly embedded in ‘delighting consumers everyday’. During the year, our On-Shelf-Quality improved by 30% over the previous year. Leveraging technology and data-led decision-making continues to be a big thrust for HUL. We are ‘re-imagining HUL’ by embedding technology across the value chain to make us future-ready. Our e-commerce channel continued its strong growth trajectory with a dedicated team working closely with our key partners to create competitive advantage for the business. I would like to take this opportunity to thank each and every employee as well as those working with our partners across our value chain for their commitment and service to HUL. Most importantly, I would like to thank you, our shareholders, for your overwhelming trust, support and confidence in Hindustan Unilever Limited. Warm regards, Sanjiv Mehta Chairman and Managing Director * Comparable basis: Reflectin...
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  • Fall '19
  • Hindustan Unilever, Harish Manwani

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