Unilever Earnings Call Highlights Margin Gains, FX Drag

Unilever plc ((UL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Unilever’s latest earnings call struck a cautiously upbeat tone, with management stressing broad-based operational improvement despite tough currency and regional headwinds. Strong growth in Power Brands, expanding margins, solid cash generation and a sharper portfolio post Ice Cream demerger underpinned confidence, even as Latin America, China and FX dragged on reported results.

Underlying Growth Reaccelerates

Unilever posted full-year underlying sales growth of 3.5%, split between 1.5% volume and 2.0% price, showing that growth is now volume-led rather than price-driven. Momentum improved through the year, with Q4 underlying sales up 4.2% and volumes accelerating to 2.1%, signaling healthier demand across key categories.

Power Brands Drive the Engine

The company’s 30 Power Brands, now over 78% of turnover, again outperformed with 4.3% underlying sales growth and 2.2% volume for the year. Q4 was even stronger at 5.8% growth and 3.5% volume, giving a two-year CAGR of 5% and underscoring that the core of the portfolio is gaining share and pulling the group forward.

Beauty & Wellbeing and Personal Care Lead

Beauty & Wellbeing delivered 4.3% underlying sales growth, well balanced between 2.2% volume and 2.1% price, reflecting resilient demand in premium and wellness-oriented products. Personal Care grew 4.7%, with margins rising 50 bps to 22.6% and operating profit reaching €3.0bn, showing that pricing and mix are sticking without eroding volumes.

Home Care and Foods Turn Up Profitability

Home Care’s underlying sales increased 2.6%, largely volume-led at 2.2%, with Q4 growth accelerating to 4.7% and volumes up 4.0%, a meaningful recovery in a historically volatile category. Foods grew 2.5% and delivered a record 22.6% operating margin, up 130 bps, generating €2.9bn of profit and validating the strategy in staples and condiments.

Margins Lift as Costs Come Down

Group underlying operating margin expanded 60 bps to 20%, supported by both a 20 bp gross margin gain to 46.9% and a 50 bp reduction in overheads. This marks the third consecutive year of gross margin expansion, signaling that pricing discipline, mix improvement and structural cost savings are feeding through to the bottom line.

Productivity Program Ahead of Plan

Unilever’s productivity program has already delivered more than €670m of savings, running ahead of the 2026 timetable and targeting €800m in total. These efficiencies are materially contributing to margin expansion, freeing up funds to reinvest in brands while preserving profit growth in a competitive, promotional environment.

Robust Cash Flow and Balance Sheet

Free cash flow reached €5.9bn with 100% cash conversion, or €6.3bn excluding Ice Cream demerger-related items, underlining strong cash discipline. Net debt fell by €1.4bn to €23.1bn, leaving leverage at roughly 2.0x underlying EBITDA and giving the group balance-sheet flexibility for continued shareholder returns and targeted deals.

High Returns and Shareholder Payouts

Underlying return on invested capital stands at 19%, placing Unilever in the top third of its sector and boosted by around 100 bps from the Ice Cream separation. The company returned €6.0bn to shareholders through €4.5bn of dividends and €1.5bn of buybacks and has announced a fresh €1.5bn buyback, maintaining a disciplined capital-return profile.

Portfolio Rotation and Strategic Deals

Around 15% of the portfolio was rotated in 2025 via the Ice Cream demerger and 10 other transactions, shrinking exposure to non-core assets and focusing on faster-growth spaces. Recent acquisitions such as Minimalist, Wild and Dr. Squatch expand Unilever’s footprint in premium, digital-first and e-commerce-led brands, aiming to sharpen growth and mix over time.

Brands and Innovation Gain Traction

Liquid I.V. has become a billion-euro franchise with over 18% household penetration in the U.S., while OLLY has crossed the €500m mark, showcasing the potential of newer wellness brands. Several established names posted double-digit growth, including Dove and Vaseline, and Hellmann’s flavored mayo is now a €100m platform, supported by brand and marketing spend rising to 16.1% of turnover.

Regional Strength in North America and APA

North America delivered 5.3% underlying sales growth with volumes up a solid 3.8%, confirming that Unilever is gaining share in a key profit pool. Asia Pacific & Africa grew 4.6% with 3.0% volume, and Q4 surged to 6.9% growth with 5.7% volume, helped by a strong Indonesian rebound of around 17% in the quarter.

FX and Reported Earnings Under Pressure

Despite operational progress, reported turnover dropped 3.8% to €50.5bn, largely because foreign-exchange movements shaved 5.9% off sales. Currency also cut underlying EPS by 8.8%, leaving reported EPS up only 0.7% to €3.08 and underlying operating profit down 1.1% to €10.1bn, even as margins widened.

Regional and Category Soft Spots

Latin America volumes fell 5.1%, with price up 5.9% merely offsetting the decline amid macro and political instability, while China was flat for the year despite a better second half and mid-single-digit Q4 growth. Hair Care was flat overall and faced issues in the U.S., while Deodorants in Brazil and non-Power Brands, which saw negative volumes, highlighted areas needing sharper execution.

Cash Flow Drag from Demerger Costs

Free cash flow came in roughly €400m below the prior year, mainly due to Ice Cream demerger costs including taxes tied to disposals. Management emphasized that excluding these separation items, FCF would have reached about €6.3bn, reinforcing that underlying cash generation remains strong despite one-off restructuring effects.

Inflation and Promotional Pressures

Looking ahead, Unilever flagged ongoing inflation in key inputs such as palm oil, canola oil and surfactants, along with wage pressures and possible imported inflation from weaker emerging market currencies. At the same time, promotional intensity is picking up, particularly in Foods, and certain channels like club stores and DTC are seeing mix and acquisition-cost headwinds that require tactical pricing and format changes.

Portfolio Actions Weigh on Reported Sales

The net impact of acquisitions and disposals reduced reported growth by 1.2%, as exits from non-core businesses more than offset contributions from newer deals. While this dents near-term revenue, management framed these portfolio moves as essential to concentrating resources on higher-growth, higher-margin brands that can compound value over the long term.

Guidance and Outlook

For 2026, Unilever is guiding to underlying sales growth around 4%, the low end of its 4–6% range, with at least 2% volume growth and a modest further margin uplift. The company plans to sustain elevated brand and marketing investment, direct over half of roughly 3.1% CapEx to productivity and complete its €800m savings program while maintaining disciplined leverage, steady dividends and an additional €1.5bn buyback.

Unilever’s earnings call painted the picture of a business regaining momentum through stronger brands, better execution and tighter cost control, even as FX and some regions hold back headline numbers. For investors, the story is one of improving quality of growth, rising margins and dependable cash returns, balanced by currency risk and the need to fix weaker markets and lagging categories.