Haleon PLC Earnings Call: Margins Up, Volumes Lag

Haleon PLC ((GB:HLN)) has held its Q4 earnings call. Read on for the main highlights of the call.

Haleon PLC’s latest earnings call painted a cautiously optimistic picture, as robust margin gains and strong execution in Oral Health and key emerging markets were offset by weak volumes, a soft cold and flu season, and U.S. market softness. Management struck a confident tone on restoring medium-term growth, but near-term guidance remained conservative to reflect ongoing category and channel uncertainty.

Organic Growth Guidance and Medium-Term Ambition

Haleon guided to 3%–5% organic sales growth for 2026 after delivering 3% in 2025, underscoring a conservative stance amid choppy market conditions. Even so, the company reiterated its medium-term ambition of 4%–6% organic growth, signaling confidence that current investments and efficiency gains can eventually unlock stronger top-line momentum.

Gross Margin Expansion and Productivity Gains

Gross margin improved by roughly 220 basis points in 2025, driven by supply chain productivity initiatives and simplification of operations across the portfolio. Management emphasized these gains as evidence that structural changes are taking hold, though they cautioned that such a step-up is not fully repeatable every year.

Reorganisation-Driven Cost Savings

A new operating model with a flatter structure is expected to deliver $175–$200 million in gross savings, freeing up funds for reinvestment. These savings are being targeted toward advertising and promotion, research and development and capabilities, aiming to reinforce Haleon’s growth engines rather than simply dropping to the bottom line.

Oral Health as the Growth Engine

Oral Health again stood out as a bright spot, with Sensodyne and Parodontax delivering high-single-digit to double-digit growth in key markets and Parodontax growing in the mid-teens. Management directed about half of the incremental A&P increase to Oral Health, underscoring confidence in the category’s ability to drive sustainable, branded volume growth.

Emerging Markets Momentum in India and China

Emerging markets, particularly India and China, continued to show strong momentum despite a later-year slowdown elsewhere. India delivered double-digit growth helped by low-price INR20 packs and deeper rural reach, while China posted mid-single-digit growth with e-commerce now about 40% of sales and Douyin sales more than doubling.

Stepped-Up Investment in A&P and R&D

Haleon increased A&P spending by about 7.5% and R&D by roughly 7.7% year over year, lifting total A&P to around 20.5% of sales. The company shifted more toward digital, with about 60% of working media digital, and reported mid-single-digit improvements in return on investment and wider campaign coverage.

Supply Chain Simplification and SKU Rationalisation

Supply chain simplification delivered tangible benefits, highlighted by reducing Aquafresh Europe from 44 single-language packs to 18 multi-language SKUs. At the Levice factory, a 30% reduction in formulations increased capacity and reduced changeovers, helping underpin margin gains and service levels.

Operational Efficiency and OEE Progress

Operational execution improved, with Overall Equipment Effectiveness rising by seven points in 2025, a key indicator of factory productivity. Looking ahead, management expects supply chain productivity to contribute a steady 50–80 basis points annually, forming a structural tailwind to margins and earnings growth.

U.S. Market Softness and Cold & Flu Drag

The U.S. remained a weak spot, with sales down about 0.5% in 2025 as a muted cold and flu season and category-specific issues weighed on performance. Management flagged that the current Q1 cold and flu season is tracking below last year but reiterated that the U.S. must and should return to growth in 2026 to meet medium-term targets.

Cold & Flu Category Headwinds

A softer-than-expected cold and flu season was cited as a major driver of the overall slowdown, marking the second consecutive year of underwhelming performance in this key category. With Q1 2026 expected to remain below prior-year levels, Haleon faces a tougher comparison and less seasonal tailwind to support short-term growth.

Volume Growth Underperformance Versus Peers

Volume growth has averaged around 1% over the last three years, which management acknowledged is low compared with peers and too reliant on price mix. To reach the 4%–6% medium-term organic growth ambition, the company stressed that a much higher contribution from volumes will be necessary across categories beyond Oral Health.

Digestive Health and Nexium Pressure

Digestive Health was another weak area in 2025, with Nexium in the U.S. facing pressure from private-label competition that eroded branded performance. This category-specific challenge contributed to the broader volume underperformance and highlighted the need for sharper positioning and innovation in over-the-counter digestion.

Emerging Markets Q4 Slowdown and LatAm Strain

Despite strong full-year metrics, emerging markets saw a sequential slowdown in Q4, particularly in Latin America and Brazil. A softer cough and cold season and a tougher retail and macro backdrop in parts of Latin America and Central Europe limited momentum, adding another layer of caution to near-term growth expectations.

Retailer Inventory and Channel Uncertainty

Retailer destocking and lower inventory levels at large U.S. chains contributed to muted sell-through and visibility in 2025, especially at major drug retailers. Management also highlighted uncertainty around future channel dynamics, with potential ownership changes at certain chains adding risk to forecasting and planning.

A&P Spending Versus Volume Delivery

The company’s sizeable increase in A&P, including heavier digital and higher-ROI campaigns, did not yet translate into overall volume growth, which remained negative in 2025. This disconnect raised investor questions about near-term top-line leverage, especially outside the high-performing Oral Health portfolio.

Productivity Ceiling and Normalised Margin Gains

Management cautioned that the standout 220 basis point gross-margin uplift in 2025 represents something of a one-off step change rather than an annual run rate. Future guidance assumes a more modest 50–80 basis points of supply chain productivity per year, implying that margin expansion will normalize even as efficiencies continue.

Forward Guidance and Investment-Led Growth Path

For 2026, Haleon guided to 3%–5% organic sales growth with an expectation of high-single-digit operating profit growth at constant currency, even while continuing to invest in A&P and R&D. The company is banking on emerging markets strength, ongoing supply chain productivity and a recovery in U.S. trends to close the gap toward its 4%–6% medium-term growth ambition.

Haleon’s earnings call laid out a story of solid operational execution and disciplined investment, set against a tougher demand backdrop and disappointing volumes. Investors will be watching closely to see whether margin gains, cost savings and strong Oral Health and emerging markets momentum can translate into broader volume growth and a more balanced, sustainable top-line trajectory.