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01/09 22:15
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates strong financial performance in the U.S. market, growth in India and Indonesia, and improved margins. Despite challenges in Latin America and China, corrective actions and optimistic guidance for H2 are promising. Market share gains, strategic pricing adjustments, and a strong focus on innovation further support a positive outlook. The Q&A section did not reveal significant negative concerns, and management's strategy aligns with market expectations. Overall, the sentiment is positive, with the potential for a 2% to 8% stock price increase over the next two weeks.
Underlying Sales Growth (USG) 3.4% for the first half of 2025, with volumes contributing 1.5% and price 1.9%. This reflects a balance of volume and price growth, driven by input cost inflation and currency movements.
Developed Markets USG 4.3% for the first half, driven by 3.4% volume and 0.9% price. This marks four consecutive quarters of growth around 4%, supported by premium innovations and brand investments.
North America USG 5.4% for the first half, with 3.7% from volume. Growth was driven by portfolio transformation, premium innovations, and increased brand investment.
Europe USG 3.4% for the first half, with 2.8% from volume. Growth was broad-based, supported by premium innovations in Home Care and Ice Cream.
Asia Pacific Africa USG 3.5% for the first half, with 1.9% from volume and 1.6% from price. Growth was led by India and improvements in China and Indonesia.
Latin America USG 0.5% for the first half, with a 4.6% decline in volume. Pricing actions to offset currency movements and subdued market growth impacted performance.
Beauty & Wellbeing USG 3.7% for the first half, driven by 1.7% volume and 2% price. Growth was led by Wellbeing brands and premium innovations.
Personal Care USG 4.8% for the first half, driven by 1.4% volume and 3.3% price. Growth was supported by premium innovations and acquisitions.
Home Care USG 1.3% for the first half, with 1.1% from volume and 0.2% from price. Growth was driven by premium innovations in Europe and Asia.
Foods USG 2.2% for the first half, with 0.3% from volume and 1.9% from price. Growth was led by Hellmann's flavored mayonnaise and Knorr.
Ice Cream USG 5.9% for the first half, with 3.8% from volume and 2% from price. Growth was supported by premium innovations and operational improvements.
Turnover EUR 30.1 billion for the first half, down 3.2% year-on-year due to a negative currency impact of 4% and portfolio changes.
Underlying Operating Margin 19.3% for the first half, down 30 basis points year-on-year due to increased brand and marketing investments.
Free Cash Flow EUR 1.1 billion for the first half, down from EUR 2.2 billion in the prior year due to lower operating profit, Ice Cream separation costs, and higher working capital.
Ice Cream: Strong performance with 5.9% underlying sales growth driven by 3.8% volume and 2% price growth. Magnum Utopia range and Bon Bons snacking format contributed significantly. Ice Cream is set to operate as a stand-alone business post-demerger in November 2025.
Beauty & Wellbeing: 3.7% underlying sales growth driven by 1.7% volume and 2% price. Strong performances from Liquid IV, Nutrafol, and Vaseline. Dove relaunched with fiber repair technology and new packaging.
Personal Care: 4.8% underlying sales growth driven by 1.4% volume and 3.3% price. Dove and Dove Men+Care grew double digits, supported by whole body deodorants. Acquisitions of Wild and Dr. Squatch to strengthen premium and natural segments.
Home Care: 1.3% underlying sales growth driven by 1.1% volume and 0.2% price. Innovations like Wonder Wash and Comfort CrystalFresh technology contributed to growth.
Developed Markets: Strong performance with 4.3% underlying sales growth in the first half, driven by 3.4% volume and 0.9% price. North America grew 5.4%, supported by premium innovations like sugar-free Liquid IV and Hellmann's flavored mayonnaise.
Emerging Markets: Improved performance with 3.5% underlying sales growth in Asia Pacific Africa. India grew 5% in Q2, while China and Indonesia showed signs of recovery. Latin America faced challenges with 0.5% growth due to currency impacts and subdued markets.
Operational Efficiencies: Productivity program ahead of expectations, with EUR 650 million in cumulative savings expected by year-end. Focus on cost-to-serve optimization and advanced productivity models.
Brand Investment: Increased brand and marketing investment to 15.5% of turnover, focusing on Power Brands like Beauty & Wellbeing and Personal Care.
Ice Cream Demerger: Ice Cream business to operate as a stand-alone entity from November 2025. Unilever to retain a 20% stake for up to 5 years.
Portfolio Transformation: Shift towards premium, high-growth segments with acquisitions like Minimalist, Wild, and Dr. Squatch. Sale of non-strategic assets like The Vegetarian Butcher.
Focus on Key Markets: Increased investment in the U.S. and India to drive above-average volume growth. Appointment of new head for India to strengthen market presence.
Currency Depreciation: The depreciation of the U.S. dollar versus the euro has negatively impacted turnover, with a currency impact of 4% in the first half and an expected 5-6% for the full year.
Emerging Market Challenges: Weak performance in Latin America, particularly in Brazil and Mexico, due to subdued market growth and macroeconomic challenges. Additionally, low single-digit declines in China and Indonesia have been noted, though some recovery is expected.
Input Cost Inflation: Ongoing inflationary pressures from commodities and currency movements, particularly affecting Ice Cream, Personal Care, and operations in Latin America.
Volume Declines in Key Markets: Latin America experienced a 4.6% decline in volume, with Brazil and Mexico showing single-digit declines. Indonesia and China also faced volume challenges.
Competitive Pressures: Competitive pressures in the laundry powders segment in Brazil have impacted Home Care performance.
Regulatory and Separation Costs: Costs associated with the separation of the Ice Cream business and regulatory approvals for retaining a stake in the new entity.
Softness in U.S. Prestige Beauty Market: Prestige Beauty brands like Dermalogica and Paula's Choice have been impacted by softness in the U.S. market.
High Base Effect in Latin America: Growth in Latin America is being compared against a high base from the previous year, making current performance appear weaker.
Supply Chain Resilience Costs: Higher working capital has been allocated to support supply chain resilience during periods of tariff uncertainty.
Revenue Growth: Unilever expects underlying sales growth to be within the range of 3% to 5% for 2025, with growth in the second half outpacing the first half.
Operating Margin: The company anticipates an improvement in underlying operating margin for the full year, with second-half margins of at least 18.5%, supported by volume growth leverage, higher productivity, and value chain interventions.
Emerging Markets: Unilever expects further acceleration in emerging markets, particularly in Asia Pacific and Africa, driven by improvements in China and Indonesia and momentum in India.
Developed Markets: Continued outperformance in developed markets, with North America and Europe leading growth through premium innovations and portfolio transformation.
Ice Cream Business Demerger: The demerger of the Ice Cream business will take place in mid-November 2025. Unilever will retain a stake of just below 20% for up to 5 years, with plans to sell the stake gradually.
Currency Impact: If current currency trends persist, the full-year turnover will face a negative impact of 5% to 6%, with a 20 basis point effect on underlying operating margin.
Capital Allocation: Unilever plans to allocate at least 55% of its capital expenditure towards margin-accretive initiatives and expects to achieve approximately EUR 650 million in cumulative savings by year-end 2025.
Free Cash Flow: The company expects free cash flow conversion of around 100% for the full year, with stockholding increases in the first half to be reversed in the second half.
Strategic Focus: Unilever will continue to shift its portfolio towards Beauty & Wellbeing and Personal Care, invest in premium science-based innovation, and focus on operational excellence to drive growth.
Quarterly Interim Dividend: The quarterly interim dividend for the second quarter is up 3% compared to Q2 2024 and is in line with Q1 2025 dividend.
Share Buyback Program: Unilever completed a EUR 1.5 billion share buyback program announced in February, which was concluded at the end of May. Share buybacks contributed 1.5% to earnings in the first half of 2025.
The earnings call presents mixed signals. Positive aspects include a strong cash position, new partnerships, and growth in U.S. Vascular Access. However, declining gross margins, a decrease in EBITDA, and uncertainties in the U.S. Advanced Wound Care channel weigh negatively. The Q&A section highlights management's optimism and strategic plans but lacks clarity on key issues. Given these mixed factors, the stock price is likely to remain stable over the next two weeks, resulting in a neutral sentiment prediction.
The earnings call indicates a positive sentiment with a 6% sales increase and strong recurring software revenue growth. The slight decline in gross margin is attributed to product mix volatility. Q&A reveals strong demand and a robust backlog, with management confident in business prospects and maintaining a strong balance sheet. Despite concerns about margin sustainability and tariff impacts, the overall outlook is optimistic, supported by a special dividend and ongoing innovation. No significant negative factors were highlighted, suggesting a positive stock price movement.
The earnings call presents a mixed picture. Positive aspects include increased profitability, improved net debt ratio, and ISM growth. However, negative factors such as declining volumes in book printing, Canada Post disruptions, and no commitment to dividend increases balance the outlook. The Q&A reveals uncertainties in revenue targets and cost savings impact, tempering optimism. The stock price reaction is likely neutral, with slight positive and negative elements offsetting each other.
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