Unilever PLC (UL) H1 2023 Earnings Call Transcript

Financial Data and Key Metrics Changes - Unilever's turnover for the first half was €30.4 billion, up 2.7% compared to last year, with underlying sales growth of 9.1% [38] - Underlying operating margin improved by 10 basis points to 17.1%, driven by gross margin improvements and increased brand investment [17][38] - Underlying earnings per share increased by 3.9% in current currency, despite a negative foreign exchange impact of 5.3% [42] Business Line Data and Key Metrics Changes - Beauty & Wellbeing reported 8.8% growth in the quarter, with a balance of 4.9% volume and 3.7% price [26] - Personal Care delivered 9% growth in the quarter, with 5.4% price and 3.4% volume [28] - Nutrition grew by 8.9%, led by price at 11.8%, while volume was down 2.6% [30] - Ice Cream grew 5.6%, with price up 12.1% and volumes down 5.8% [31] Market Data and Key Metrics Changes - The U.S. reported 7.4% growth in the half, with strong contributions from Prestige, Beauty, and Health & Wellbeing [19] - India grew by 9.1%, with a good balance of price and volume, particularly strong in Home Care [19] - Emerging markets represented nearly 60% of turnover and grew at 10.6%, led by price but with positive volume [20] Company Strategy and Development Direction - The new CEO emphasized the need to enhance brand investment and innovation to drive performance and competitiveness [4][6] - Focus on sustainability, particularly in reducing greenhouse gas emissions and improving packaging [8] - Continued investment in R&D and brand marketing to support growth plans [43] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation is moderating, but there are still pockets of volatility, particularly in agricultural commodities [47] - The company expects underlying sales growth to be above 5% for the full year, with a modest improvement in operating margin [44] - Management is focused on returning Unilever Indonesia to competitiveness, with ongoing efforts to reset pricing and promotional strategies [59][60] Other Important Information - The company completed the acquisition of Yasso, a premium U.S. frozen Greek yogurt brand, and disposed of the Suave brand in the U.S. [18] - Digital commerce grew by 16% in the first half, now representing 16% of turnover [20] Q&A Session Summary Question: Key competitive advantage in the midterm - The CEO highlighted the strong portfolio of brands, with 14 brands over €1 billion, and a significant presence in emerging markets as key competitive advantages [45] Question: Pricing outlook in H2 - The CEO noted that pricing is moderating, but there are still areas of volatility, particularly in food commodities, which may require continued pricing adjustments [47][48] Question: Margin guidance and conservatism - Management acknowledged the quality of margin delivery in the first half but indicated that the operating margin typically decreases in the second half, necessitating cautious guidance [53][54] Question: Volume dynamics despite SKU reduction - Management confirmed that the reduction in SKUs has had a short-term impact on market share, but they are focused on managing the price-volume dynamic effectively [54][55] Question: Sustainability commercialization - The CEO emphasized the importance of converting sustainability efforts into commercial offerings while focusing on areas with significant impact [57][58] Question: Confidence in Indonesia's recovery - Management expressed cautious optimism about Indonesia's recovery, noting improvements in market share and ongoing strategic actions to enhance competitiveness [59][60]