Unilever’s Earnings Call: Strong Growth Amid Challenges

Unilever plc ((UL)) has held its Q2 earnings call. Read on for the main highlights of the call.

Unilever’s recent earnings call conveyed a generally positive sentiment, underscored by strong sales growth in both developed and emerging markets, particularly in Asia Pacific and India. The company demonstrated robust brand performance and is strategically preparing for the demerger of its Ice Cream division. Despite facing challenges in Latin America and China, and a slight decline in operating margin, the overall outlook remains optimistic due to strategic growth initiatives and market expansion efforts.

Strong Sales Growth

Unilever reported an impressive underlying sales growth of 3.8% in the second quarter, contributing to a 3.4% increase for the first half of 2025. This growth was balanced between volume growth of 1.5% and price growth of 1.9%, showcasing the company’s ability to drive sales through both increased demand and strategic pricing.

Developed Markets Performance

The performance in developed markets was particularly strong, with North America achieving a 5.4% underlying sales growth in the first half, driven largely by a 3.7% increase in volume. Europe also performed well, with a 3.4% growth, supported by a 2.8% rise in volume, highlighting Unilever’s solid foothold in these regions.

Emerging Markets Improvement

Emerging markets, particularly the Asia Pacific Africa region, showed significant improvement, with a 3.5% growth in the first half, accelerating to over 5% in the second quarter. India was a standout performer with a 5% growth in Q2, primarily driven by volume increases, indicating strong consumer demand in these regions.

Brand Performance

Unilever’s Power Brands, which make up over 75% of its turnover, grew by 3.8% in the first half of the year. Brands like Vaseline, Liquid IV, Nutrafol, and Magnum delivered double-digit growth, underscoring the strength and appeal of Unilever’s brand portfolio.

Ice Cream Division Preparation for Demerger

The Ice Cream division experienced a robust growth of 5.9%, with Magnum leading the charge. The division is on track for a demerger in November, with Unilever planning to retain a 20% stake, reflecting strategic portfolio management.

Latin America Volume Decline

Latin America faced a 4.6% decline in volume, primarily due to pricing actions aimed at offsetting currency movements. This decline was most pronounced in Brazil and Mexico, highlighting the challenges in these markets.

China Market Challenges

In China, Unilever encountered low single-digit declines, with continued market softness impacting brands like Dermalogica and Paula’s Choice. This reflects broader economic challenges in the region.

Operating Margin Decline

The underlying operating margin decreased by 30 basis points to 19.3%, attributed to increased brand and marketing investments. Despite this, Unilever remains committed to strengthening its brand presence and market competitiveness.

Free Cash Flow Reduction

Unilever’s free cash flow for the first half was EUR 1.1 billion, a decrease from EUR 2.2 billion the previous year. This reduction was due to lower operating profit and costs associated with the Ice Cream division’s separation.

Forward-Looking Guidance

Unilever’s forward-looking guidance for the full year anticipates an underlying sales growth of 3% to 5%, with expectations of operating margin improvement in the second half. This is expected to be driven by volume growth and productivity enhancements, reflecting the company’s strategic focus on market expansion and operational efficiency.

In summary, Unilever’s earnings call highlighted a positive outlook, driven by strong sales growth and strategic initiatives in both developed and emerging markets. Despite facing challenges in certain regions and a slight decline in operating margin, the company’s robust brand performance and strategic moves, such as the Ice Cream division’s demerger, position it well for future growth.