Unilever(UK)(UL) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full year 2023 underlying sales growth was 7% with price contributing strongly at 6.8% and volume returning to positive territory at 0.2% [88] - Fourth quarter growth was 4.7%, with a significant step-up in volume growth to 1.8% and price at 2.8% [80] - Underlying operating margin for the year was 16.7%, up 60 basis points versus 2022, with gross margin expansion of 200 basis points [122] Business Line Data and Key Metrics Changes - Beauty & Wellbeing delivered an underlying sales growth of 8.3%, with 4.4% in volume and 3.8% in price [96] - Personal Care had an underlying sales growth of 8.9% for the year, driven by mid-teens growth from Deodorants [90] - Ice Cream experienced a disappointing year with a 6% decline in volume, although price growth was 8.8% [106] Market Data and Key Metrics Changes - North America grew 7% in the quarter with volume up strongly at 6.3% [111] - Latin America grew 13.4% in the quarter, successfully navigating the commodity cycle with a pivot from price-led growth to strong volume growth of 9.1% [112] - Asia Pacific Africa grew 1.9% in the quarter with 0.7% volume and 1.1% price [116] Company Strategy and Development Direction - The company is focused on driving volume growth and mix as price growth returns to more normalized levels [80] - Significant changes in the Ice Cream business are being made to address underperformance, including a sharpened pricing and promotional strategy [107] - The company aims to solidify its position in the U.S. market before pursuing internationalization of brands [16] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current level of competitiveness is unacceptable and is investing in improving execution to turn it around [136] - The company is cautious about the outlook for Indonesia and India, with expectations of mid-single-digit declines in Indonesia for the first quarter [49] - Management highlighted the importance of brand and product differentiation to grow volume and expand gross margin consistently [94] Other Important Information - The company has made significant changes in its portfolio, including the acquisition of premium brands and the disposal of unprofitable segments [135] - Free cash flow for 2023 was strong at EUR 7.1 billion, resulting in a cash conversion ratio of 111% [145] - The company plans to allocate capital to bolt-on acquisitions to strengthen its portfolio in premium segments and faster-growing channels [147] Q&A Session Summary Question: Can you dive a little bit more into Prestige Beauty and wellness? - Management noted that all brands in Prestige Beauty have been growing double-digit, particularly those acquired recently [45] Question: What is your outlook for Indonesia and India in terms of top line and margin for 2024? - Management indicated a cautious approach for Indonesia with expected mid-single-digit declines and a positive outlook for India with volume growth expected to continue [50][49] Question: Can you explain the capital expenditure guidance and its relation to productivity? - Management guided an increase in capital expenditure from 2.7% to between 3% and 3.5% for 2024, focusing on productivity improvements [25]