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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
