Haleon plc Q2 FY2025 earnings call

North America Challenges

• Facing challenging consumer environment with trade down in smoking cessation category, shift to value channels like Dollar and Club, and inventory pressures in drug retailers.
• Actions taken: New media campaign for Advil, reactivating Centrum with new claims, and new partnership with U.S. women's soccer for Centrum.

A&P

• A&P up 6.8% in first half to 20.8%, focusing on growth drivers: closing incidence treatment gap, driving premiumization with innovation, and expanding reach to lower-income consumers. ROI improved by 4%.

CMD Ambitions

• Continued focus on innovation-led premiumization, closing incidence gap, and initiatives like low-income consumer packs in India, Brazil, etc., with ongoing investment in A&P and R&D.

In Q2, EMEA, LatAm, and APAC were well within the medium-term 4% to 6% organic sales growth guidance. North America had a nearly 2% organic sales growth decline. Market in North America was slightly down ~0.5% while Haleon's consumption was slightly up ~0.5%. Oral Health in North America was growing ahead with market share gains. APAC had 4.6% growth over the last 3 years. EMEA and LatAm showed improving trajectory in Q2 versus Q1.

Full Year

• Guidance around 3.5% organic growth, expecting inventory pressure to continue in North America.

Medium-Term

• Confident in returning to growth in EMEA, LatAm, and APAC, with EMEA and LatAm showing improving volume growth trajectory in Q2 versus Q1. A&P investment expected to continue with similar shape in second half.

• North America consumer environment challenges impacting growth.
• Inventory pressures in U.S. drug retailers affecting performance.
• Complex ownership structure in nicotine replacement business posing innovation challenges.

Q: Could you unpack North America performance in Q2 and expectations for return to growth?

A: North America had challenges due to consumer environment, shift to value channels, and inventory pressures. Actions taken on Advil and Centrum, expecting improved share in back half but inventory pressure to continue.

Q: On A&P, which areas are you reinvesting and expectations for H2?

A: A&P focused on growth drivers, ROI improved by 4%, and expected to continue similar investment shape in second half.

Q: On North America 3.5% growth and changes from Q1 expectations?

A: Factors like low allergy season, retailer cautiousness, and Smokers' Health weakness impacted expectations, with uncertain U.S. environment.

Q: On gain to maintain share dropping from 71% to 58%?

A: Main drivers are Advil not growing share and Centrum not growing share in first half, with plans to stabilize in back half.

Q: On U.S. retailer environment and CMD ambitions?

A: Haleon focused on share growth despite retailer challenges, CMD ambitions unchanged with continued focus on innovation and low-income initiatives.

Q: On volume performance and Europe outlook?

A: U.S. volume down, other regions showing improvement, Europe resilient with strong Oral Health performance.

Q: On Advil, Smokers' Health, and Centrum?

A: Advil has new media campaign, Smokers' Health has innovation launching, Centrum has new claims and innovations in back half.

Q: On nicotine replacement and margin?

A: Nicotine replacement has complex ownership structure, margin driven by gross margin, A&P investment, and cost control, expecting similar shape in second half.

Q: On U.S. retailer trends and channel shift?

A: Inventory pressure across channels, with Amazon growth and stronger shares there, different dynamics in Europe pharmacies.