Hindustan Unilever To Separate Its Ice Cream Business To Sharpen Focus on the Core Business

Hindustan Unilever (HUL) has made a major announcement about the separation of its ice cream business, which includes beloved brands like Kwality Wall’s, Cornetto, and Magnum. After an in-depth review by an independent committee, Hindustan Unilever (HUL) decided it was time to let the ice cream division carve out its own path, allowing the company to zero in on its core segments.

Why the Split?

Ice cream might only account for around 3% of Hindustan Unilever’s (HUL) overall turnover, but it’s a high-growth category that demands significant investment to truly reach its potential. The issue? Ice cream has a different operating model, requiring cold chain infrastructure and a unique distribution channel. This makes it tough to create synergies with HUL’s broader product range, which consists of beauty, personal care, and food.

On top of that, Unilever, Hindustan Unilever’s (HUL) parent company owns the trademarks and know-how for the ice cream brands, so HUL will need to build its local capacity once the split is finalized. It’s something that allows the company to focus on trending demand spaces like beauty, health, and well-being while giving the ice cream business the independence to chart its own path.

The Big Question: What’s Next?

According to HUL’s CFO, Ritesh Tiwari, the company is considering two options: either selling the ice cream business or a demerger and listing it as a separate entity. The final decision is expected by the end of the year.

Financials in Focus

This announcement came on the back of HUL’s Q2FY25 results. The company reported a consolidated net profit of Rs.2,591 crore, down 2.4% from last year due to high commodity costs and soft demand. Despite this, revenue climbed 2.1% to Rs.16,145 crore, surpassing expectations. Hindustan Unilever (HUL) also declared an interim dividend of Rs.29 per share, including a special Rs.10 dividend.

HUL is currently trading at Rs.2,490.95 in the market,  down 6.33% today and showing a 6.17% decline year-to-date.

Conclusion: The separation of the ice cream business is a shift for Hindustan Unilever (HUL), as the company looks to streamline its operations and strengthen its core segments. This, while aimed at maximizing shareholder value, also opens up possibilities for growth and flexibility within the ice cream category.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.