Unilever (UL) Q2 FY25 earnings call: guidance and Q&A

Will the ex-Ice Cream portfolio accelerate in H2, potentially reaching 4-6% growth, and what are the drivers for volume acceleration in Personal Care and Beauty & Wellbeing?

Management is confident in achieving over 2% volume growth for the remaining company in H2, citing improving market volumes, strengthening brand power (UBS scores), outperformance in developed markets, accelerating India growth, sustained competitive BMI levels, and a strong innovation pipeline. They expect significant contributions from Indonesia and China.

“We run the business with the intention of delivering volume growth about 2% for our remaining company, and we are very confident that we will achieve that in the second half.”

asked by Celine Pannuti · answered by Fernando Fernandez

What was the rationale behind acquiring Dr. Squatch, and is Unilever willing to step up its M&A agenda post-Ice Cream disposal?

Dr. Squatch fits Unilever's bolt-on M&A strategy for Beauty & Personal Care and Wellbeing, targeting digitally native, functional, premium brands with strong digital commerce presence. It fills a gap in male grooming and premium deodorants/skin cleansing. Unilever will continue this strategy to build a cohesive portfolio of American brands with international potential, viewing M&A as a necessary part of portfolio rotation.

“We are convinced of our strategy of bolt-on M&A. We continue piling assets in the Beauty and Personal Care space and the Wellbeing space particularly in the U.S. with the intention of really building a portfolio of American brands with great potential to travel internationally.”

asked by Celine Pannuti · answered by Fernando Fernandez

Provide more detail on Latin America's volume decline, particularly in Mexico and Brazil, and the outlook for H2. Also, elaborate on the Asia recovery (India, Indonesia, China) and the U.S. Personal Care performance, including any slowdown in prestige.

Latin America's weak quarter was due to strong comparators, market pressure, and pricing to offset currency. Unilever is addressing issues like Laundry Brazil pricing. Asia Pacific Africa showed strong Q2 growth, with India volumes up 4% and strong e-commerce/quick commerce. Indonesia and China are improving, expected to return to growth in H2. U.S. performance is strong, driven by portfolio transformation and Power Brands, despite a weak quarter in Hair Care (TRESemmé pricing) and some softness in prestige beauty.

“It has been a weak quarter in Lat Am for us. We have been lapping very, very strong comparators and markets are under pressure at the time in which we had to increase prices to cope with a sizable devaluation of currencies.”

asked by Warren Ackerman · answered by Fernando Fernandez

How is the Top 24/One Unilever organizational redesign progressing, and is there a risk of 'too many plates spinning' with the current level of M&A, disposals, and other strategic changes?

The organizational redesign is implemented, with divisionalized sales forces in Top 24 markets and a 35% smaller, accretive One Unilever structure. While execution improvements are ongoing, the model is working. Management acknowledges the high activity but views portfolio rotation and M&A as essential for higher growth and building a cohesive global portfolio of American brands, confident in their ability to manage these challenges simultaneously.

“In fast-moving consumer goods, you have to do many things and you have to do all them fast. So we are taking on that challenge and we are confident that we can manage that.”

asked by Callum Elliott · answered by Fernando Fernandez

Which divisions/regions will drive the strong H2 margin progression, and will the proceeds from the 20% retained Ice Cream stake reduce Unilever's debt or cover tax liabilities from the spin-off?

H2 margin improvement will be driven by volume leverage, superior mix, procurement savings, cost discipline, and capital expenditure repositioning. Commodity outlook is stable, allowing for continued investment. Proceeds from the retained Ice Cream stake (held for up to 5 years) will primarily cover demerger-related costs (separation, tax) and reduce net debt. The stake retention also signals confidence in Ice Cream's independent potential.

“The purpose for the reduction of the stake is clear. The costs which are coming or the on costs which are coming from the demerger, that will be first element. There will be on cost, which is separation, some tax costs or the second element would be really to pay down our debt.”

asked by Jean-Olivier Nicolai · answered by Srinivas Phatak

Are current BMI levels (15.5%) optimal for competitive advantage, or should they continue to grow? Is Unilever increasing new product launches? What are the drivers for Foods' strong margin improvement, and is it a key margin engine going forward?

Management is comfortable with current BMI levels (15-16%), noting they are significantly higher than 2022 and reflect mix shift to B&PC. Focus remains on impactful innovations, rolling them out faster (e.g., Wonder Wash). Foods' margin improvement (100 bps) is due to its concentrated portfolio (Hellmann's, Knorr), strong performance, and high return on invested capital. It's a strong, accretive business, but the focus is on consistent gross margin expansion across the company, not just Foods.

“We feel much more comfortable now with the level of investment between 15% and 16%. Of course, part of that increase is mix related.”

asked by Guillaume Gerard Delays · answered by Fernando Fernandez

Provide a wrap-up of market share performance across the business. Detail the volume slowdown in Personal Care, specifically if it was due to Latin America or other factors, and the outlook for H2.

Unilever is gaining shares in the U.S., Europe, and India. In Latin America, aggregated shares have been positive for 6 quarters, despite recent declines in Laundry Brazil. Shares are down in Indonesia and China. Personal Care's volume slowdown was primarily due to its exposure to Latin America, where the deodorants market sharply decelerated, and pricing actions in Latin America and India. Management expects a recovery in Latin America Personal Care markets in Q3 or Q4.

“However, I believe Personal Care is very exposed to Latin America, and there was a sharp deceleration of the deos market in the last few quarters. The last quarter was something like minus 5% in volume.”

asked by Jeremy Fialloy · answered by Fernando Fernandez

Update on tariffs impact on H2 margin guidance and whether more disposals are being considered to accelerate the shift towards Beauty & Personal Care.

Tariffs are not material at an aggregate level, well within margin guidance, and primarily led to H1 inventory builds for supply security, which will reverse in H2. Unilever has a plan for EUR 1.5 billion to EUR 2 billion in disposals, focusing on local European food brands and non-strategic laundry positions in smaller markets. These disposals will be executed to protect shareholder value, not as a fire sale.

“We have a plan of around EUR 1.5 billion to EUR 2 billion of disposals. It's a combination of fundamentally local brands in Europe Foods and around EUR 0.5 billion of laundry and sustainable competitive positions in One Unilever markets, small markets in which we don't have leading positions in laundry.”

asked by Sarah Simon · answered by Fernando Fernandez

Are prices too high in any categories/markets, potentially risking margin compression or requiring price reductions to stimulate volumes? Can the tax leakage from the Ice Cream spin-off be quantified?

Management acknowledged specific instances where pricing was too aggressive (Laundry Brazil, TRESemmé U.S. shampoos), leading to corrections to restore competitiveness. They noted a competitor-triggered price decrease in India Home Care that stimulated volumes. The company will not quantify the tax leakage from the Ice Cream spin-off at this stage, promising more information closer to the demerger.

“In the case of Laundry Brazil, we increased pricing. We have close to 65% share there in laundry powders. When there is significant cost and significant currency devaluation, we usually lead with pricing in the market.”

asked by David Hayes · answered by Fernando Fernandez

Is Unilever still targeting hard currency EPS growth in 2025? How should the 100 bps ROIC improvement post-Ice Cream demerger be reconciled with Ice Cream's reported 23% ROIC?

Unilever is committed to multi-year hard currency EPS growth and aims for positive growth in 2025, conditional on the euro-dollar exchange rate. The ROIC reconciliation is technical: Unilever's ROIC improves by 100 bps post-demerger due to accounting for intangibles/goodwill between Ice Cream and Foods. Ice Cream reports a higher ROIC (21-22%) based on its pure-play acquisitions and revised asset base. Both views are considered economically sound.

“On the return on invested capital, this is what I will call, it's either an accountant's delight or a nightmare. It really comes down to how we are really looking at some of the intangibles treatment when it comes to Unilever and when it comes to the Ice Cream company.”

asked by Victoria Petrova · answered by Srinivas Phatak