Haleon plc (HLN) Earnings

Management highlights

### Regional Performance & Execution - North America: Sequential improvement in organic growth driven by three core factors: improved in-store shelf placement execution, successful new innovation (including the third pillar of the clinical oral care range, Centrum Age Defy, and Excedrin Rapid Relief), and strong double-digit e-commerce growth (twice the market rate). - Emerging markets: Sequential growth improvement, with the primary drag coming from the Middle East, where the company holds disproportionately high market share and is facing broad market declines in markets like Dubai and Pakistan. Management expects improvement in the back half based on internal execution plans, not external market changes or conflict resolution. India continues to deliver mid-teens organic growth, driven by low-income consumer SKU expansion for Sensodyne. - Latin America: Growth acceleration following new regional leadership, with targeted fixes (e.g. correcting a mispriced Sensodyne skew in Brazil) driving volume growth. The new leadership team is focused on better serving low-income consumers, building on the successful Indian market playbook, and management expects this higher growth rate to be sustainable. - Europe: The broader regional market is seeing low single-digit category declines, and Halion delivered 0.4% organic growth (in line with expectations) while gaining overall market share, with Sensodyne continuing strong performance. Management does not expect the weak market backdrop to change and is focused on internal execution. - China: High single-digit growth driven by over 100% growth in the Doyen channel (supported by doubled content creation and strong performance from core brands Centrum and Caltrate), and expanded Voltaren distribution into the hospital channel. Negative pricing in Q2 was a one-off driven by the volume-based procurement model for the hospital channel, with no material sustained margin impact expected. ### Product Category Performance - Oral care: Continued strong 6.2% Q2 organic growth, led by Sensodyne and Paradontax. Growth is driven by ongoing premium innovation (the three-year clinical range launch platform has delivered the largest annual toothpaste innovations in the U.S. market) and penetration expansion in emerging markets (e.g. 20%+ growth in India, half of which comes from low-income consumer SKUs). Management expects growth to accelerate in the back half. - Pain relief: Accelerated Q2 growth driven by strong Voltaren performance (from new China launches and U.S. shelf resets), healthy Panadol growth from the Panadol Dual Action rollout, and stabilizing/st slight share growth for Advil. - VMS: The current portfolio is delivering mid-single-digit growth in the U.S. in H1, with July consumption data showing double-digit growth following shelf resets and activations. The company is addressing unmet needs in high-growth sub-segments (e.g. the newly launched GLP-1 support Centrum variant) and remains open to small bolt-on M&A, but does not see a need for large acquisitions. - Respiratory health: The segment was weak in Q2: cold and flu saw very low off-season demand, allergy had minor phasing-driven decline, and smokers' health declined at a slower sequential rate (showing early stabilization). Management expects cold and flu to grow in the back half (Q4 weighted) following two years of declines, but not return to 2024 peak levels. ### Margin & Investment - H1 operating margin improved 120 bps in constant currency, driven by 140 bps of gross margin improvement from ongoing supply chain productivity programs, plus a 40 bps tailwind from FX. Margin gains came from efficiency, not reduced investment or excessive pricing (pricing remains in line with inflation). - A&P (advertising and promotion) investment grew 3.2% in H1 (slightly ahead of sales growth), reaching 20.9% of sales. Investment is dynamically allocated to high-growth areas: 60% of A&P is now digital, with increasing spend on social and expert channels, and marketing ROI and incremental sales growth both improved in H1. Management expects increased investment in H2, focused on the Doyen channel in China and U.S. consumer activations. ### Strategic Initiatives - Long-term strategy to reach 1 billion additional consumers remains in place, focused on expanding access to affordable, quality products for low-income consumers in emerging markets. The initiative has proven successful in India and is being expanded to other markets, despite broader macro volatility. - AI is being deployed end-to-end across the business: it has improved supply chain forecast accuracy by 5-6%, increased operational effectiveness at manufacturing sites by ~5 percentage points, reduced content production costs in marketing, accelerated innovation timelines, and improved sales execution via tools like next-best-action recommendations.

Guidance

- Management maintains its full-year organic sales growth guidance of 3-5%, and expects stronger organic growth in the second half compared to the first half. - Operating margin and operating profit are expected to deliver high single-digit growth in the second half, similar to the first half performance despite absorbing increased Middle East freight costs as fixed hedged contracts roll off. Gross margin is still expected to improve in the second half, though potentially not at the same magnitude as the first half. - Strong double-digit EPS growth is expected in the second half, following 12% EPS growth in the first half. - The company's medium-term organic sales growth ambition remains 4-6%.

Segment performance

The transcript does not provide absolute financial values or revenue contribution percentages for individual product or geographic segments. It only includes organic growth rates for key regions and categories: North America delivered 3.1% organic sales growth in Q2 (up from 2.2% in Q1) with 2% volume growth; emerging markets delivered 6.3-6.4% sequential organic growth; Europe delivered 0.4% organic growth amid a broader category decline; Latin America accelerated to high single-digit organic growth from low single-digit/Q1 flattish performance; China delivered high single-digit organic growth in Q2 with double-digit volume growth; oral care delivered 6.2% organic growth in Q2 (half year 7.3%); pain relief saw accelerating growth in Q2 driven by Voltaren and Panadol; VMS delivered mid-single-digit organic growth in the first half of 2026; respiratory health was a drag in Q2, shaving 150 bps off overall organic sales growth, with a sequential slowdown across most sub-segments.

Risks & headwinds

- Ongoing conflict and macroeconomic weakness in the Middle East and Pakistan is dragging on emerging market performance, and the company has disproportionately high market share in this region that amplifies the impact of broad market declines. Increased freight costs from the region will start to hit the P&L in the second half as existing fixed-price hedged contracts roll off. - Weak consumer demand and category declines in Europe create a headwind to overall growth, and management does not expect this macro backdrop to improve in the near term. - The respiratory health (cold and flu) category has now seen two consecutive years of unexpected declines, and any continued weakness would create an additional headwind to back half growth. - Competitor innovation in the cold and flu category could create pressure on Halion's market share, though management states it is prepared for expected competitive launches. - While oral care growth remains strong, a key competitor has recently reported unexpected declines in their oral care segment, and there is uncertainty around how long share gains from competitor turmoil can continue.

Analyst Q&A

• Q: What progress has Halion made in North America, what benefits have come from shelf resets, and how is the company balancing margin outperformance with adequate investment in the business? /

  A: North America delivered sequential improvement to 3.1% organic growth in Q2, with 2% volume growth. Growth is driven by shelf reset execution, strong innovation performance, and double-digit e-commerce growth, and management expects stronger growth in the second half. A&P investment grew slightly faster than sales in H1, with dynamic allocation to high-growth opportunities. The company plans to step up investment further in H2, focusing on the Doyen channel in China and U.S. activations, and margin gains come from supply chain efficiency rather than underinvestment.

• Q: What is driving the acceleration of Latin American growth, and what is the outlook for performance in Europe? /

  A: Latin America growth accelerated to high single digits in Q2 after a flattish Q1, driven by a new regional leadership team that has quickly addressed operational missteps (such as correcting a mispriced Sensodyne skew in Brazil) and is focusing on expanding access for low-income consumers. This higher growth rate is expected to be sustainable in the back half. Europe is facing a broad low single-digit category decline, and Halion delivered 0.4% organic growth in line with expectations while gaining market share. Management does not expect the weak European backdrop to improve and remains focused on internal execution rather than counting on external improvement.

• Q: What is the sustainable long-term growth rate for oral care, and can you speak to the need for new leadership to fix LATAM infrastructure? /

  A: Halion's 6.2% Q2 oral care growth remains strong, and management expects growth to accelerate in the back half. Growth is driven by broad-based expansion: premium innovation growing the category, increasing penetration of sensitivity toothpaste among the large global population with sensitive teeth, and low-income SKU expansion in emerging markets. Competitor share movements do not change the company's long-term growth agenda. The LATAM leadership change was part of a broader operating model restructuring to put more focused senior leadership behind high-growth emerging regions. The Sensodyne pricing misstep was a minor isolated issue, but new regional talent has accelerated fixes and will drive longer-term improvement across the region.

• Q: What benefits is AI delivering to the business, relative to earlier expectations? /

  A: AI is now embedded end-to-end across the business, delivering tangible benefits. It has improved demand forecast accuracy by 5-6% in supply chain, increased manufacturing operational effectiveness by ~5 percentage points, reduced content production costs in marketing, accelerated innovation timelines for new product claims, and improved sales execution. The company is still on a multi-year journey to scale AI capabilities, but is already seeing measurable productivity and growth benefits that support margin expansion.