Unilever(UK)(UL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year, underlying sales growth was 3.5%, with volumes at 1.5% and price at 2% [4] - Turnover for the full year was EUR 50.5 billion, down 3.8% versus the prior year, primarily due to significant currency headwinds [23] - Underlying operating margin expanded by 60 basis points to 20% in 2025, reflecting a structurally strong margin profile [24] - Underlying EPS rose to EUR 3.08, up 0.7% versus the prior year, with sales growth and margin expansion contributing 6.5% to EPS growth [26] Business Line Data and Key Metrics Changes - Beauty and Wellbeing delivered underlying sales growth of 4.7% for the full year, with volumes up 2.8% [8] - Personal Care delivered underlying sales growth of 4.7% for the full year, driven by strong performance in the U.S. [9] - Home Care delivered underlying sales growth of 2.6% for the year, primarily volume-led at 2.2% [11] - Foods delivered underlying sales growth of 2.5% for the year, with 0.8% from volume and 1.7% from price [13] Market Data and Key Metrics Changes - Developed markets delivered underlying sales growth of 3.6% for the year, with North America being a standout performer [16] - Emerging markets delivered underlying sales growth of 3.5% for the year, with growth accelerating to 5.8% in the fourth quarter [18] - In India, underlying sales grew 4% for the year, with volumes up 3% [20] - In China, underlying sales growth was flat for the year, but showed improvement in the second half [21] Company Strategy and Development Direction - The company aims to focus on premium segments, digitally native brands, and dCommerce exposure, particularly in the U.S. and India [31] - The company is committed to simplifying its portfolio through targeted disposals while pursuing bolt-on acquisitions aligned to its strategy [32] - The company expects underlying sales growth for 2026 to be at the bottom end of the multi-year range of 4%-6% [34] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in emerging markets, citing improved performance and brand equity in India and Indonesia [49][50] - The management acknowledged challenges in developed markets but noted strong execution and brand performance in North America [53] - The company anticipates inflationary pressures in select commodities for 2026, but overall inflation is expected to be lower than in 2025 [34] Other Important Information - Free cash flow for the year was EUR 5.9 billion, representing 100% cash conversion [28] - The company returned EUR 6 billion to shareholders in 2025, comprising EUR 4.5 billion in dividends and EUR 1.5 billion in share buybacks [31] - The company completed the ice cream demerger and 10 transactions during the year, significantly increasing focus on growth [32] Q&A Session Questions and Answers Question: Can you talk about the emerging market outlook for 2026? - The management expressed confidence in emerging markets, highlighting improved performance in India and Indonesia, and a gradual recovery in China [49][50] Question: Can you discuss the pricing outlook for 2026? - The management expects pricing to be around 2% for 2026, with some increased promotional spending, particularly in foods [60] Question: What are the key building blocks supporting confidence in achieving margin improvement in 2026? - The management highlighted consistent gross margin expansion, productivity savings, and disciplined capital allocation as key factors supporting margin improvement [63][64]