Unilever plc ((UL)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Unilever’s latest earnings call was marked by a positive overall sentiment, driven by strong volume-led growth and significant improvements in gross margin and shareholder returns. Despite these achievements, the company faced ongoing challenges in key markets such as China and Indonesia, as well as inflationary pressures and increased finance costs.
Volume-Led Growth
Unilever reported an impressive underlying volume growth of 2.9% for 2024, with contributions from all five Business Groups. This highlights the company’s ability to drive growth through effective volume strategies across its diverse portfolio.
Gross Margin Improvement
The company achieved a notable increase in gross margin by 280 basis points to 45%, surpassing pre-COVID levels in all Business Groups except Ice Cream. This improvement underscores Unilever’s effective cost management and operational efficiency.
Strong Performance in Beauty & Wellbeing
The Beauty & Wellbeing segment stood out with a 6.5% increase in underlying sales growth, propelled by a 5.1% volume growth. This performance reflects the segment’s successful market strategies and consumer appeal.
Significant Capital Return to Shareholders
Unilever demonstrated its commitment to shareholder value by returning €5.8 billion in 2024 through dividends and share buybacks, reinforcing investor confidence in the company’s financial health.
Productivity Program Ahead of Schedule
The company’s productivity program is ahead of schedule, achieving a reduction of 4,300 full-time roles by the end of 2024, well on its way to the planned reduction of 7,500 roles by 2025.
Strong Performance in North America
North America reported a robust 7% growth with volumes exceeding 6%, driven by the strong performance of the Wellbeing and Prestige segments, indicating a healthy market presence.
Improved Cash Conversion
Unilever’s cash conversion stood strong at 106%, surpassing the long-term ambition of around 100%, showcasing the company’s efficient cash management practices.
Challenges in China
China presented mid-single-digit declines due to market weakness and a transition to tailored customer development and digital routes, representing a significant challenge for Unilever in this key market.
Subdued Growth in Ice Cream
The Ice Cream segment experienced a modest 3.7% underlying sales growth. However, ongoing challenges in achieving gross margin improvements remain a concern.
Increased Net Finance Costs
Higher interest rates impacted Unilever’s net finance costs, which stood at 2.5% of average net debt, reflecting broader economic challenges.
Inflationary Pressures
Significant inflation in key materials like cocoa and dairy is expected to influence pricing strategies in 2025, posing a challenge for cost management.
Softness in Indonesia
Indonesia faced an 8.7% decline due to longstanding portfolio and brand proposition issues, marking a critical area for strategic improvement.
Forward-Looking Guidance
Looking ahead, Unilever anticipates a balanced contribution between volume and price growth in 2025, with a modest improvement in the underlying operating margin expected in the latter half of the year. The company plans to continue its strategic focus on its 30 Power Brands, which have shown strong sales growth.
In conclusion, Unilever’s earnings call highlighted a positive sentiment driven by substantial volume-led growth and gross margin improvements. Despite challenges in certain markets and inflationary pressures, the company demonstrated resilience and strategic focus, with promising forward-looking guidance for 2025.
