Haleon plc Q4 FY2025 earnings call

• Reorganization: Created Chief Growth Officer role combining category structure, marketing, insights, analytics, and commercial excellence; 6 operating units replacing 3 regions. Bringing in new leaders in various regions. In U.S., Natalie made changes in category heads, brought in external talent, and Q2 shelf resets expected for distribution and shelving wins in Oral Health, VMS, and Pain Relief.
• Productivity program: Delivered 220 basis points of gross margin improvement. Reduced complexity in supply chain, e.g., in Europe reduced Aquafresh single language packs. Operational efficiency with process improvements, e.g., Levice factory reduced formulations by 30%.
• A&P and R&D investment: Over 7% increase in A&P and R&D from previous year. Half of A&P increase went to Oral Health, half to emerging markets, and part to experts like Haleon Health portal and field force engagement. 60% of working media allocated to digital.

In 2025, organic sales growth was 3%. The U.S. was down about 0.5%, while APAC and EMEA, LatAm grew mid-single digits. 60% of the business gained and maintained share. Oral Health business was strong, helping offset softer cold and flu. Emerging markets: Asia Pac delivered strong performance with 80% of growth from volume mix, India had double-digit growth and acceleration in Q4, China had mid-single-digit growth with e-com and Douyin performing well. EMEA, LatAm saw a slowdown in Q4 due to soft cough, cold and flu season. Oral Care: Sensodyne's clinical range resonated well, India's low-income consumer on Oral Health, Parodontax growing in double digits, China launch progressing. Digestive Health: Over 80% of business in U.S., India, Brazil; U.S. had drag on Nexium but opportunities with GLP-1s. Pain Relief: Voltaren's topical and patch business, Panadol doing well in Asia, Advil growing share in Q4 with new structure and focus.

• 2026 organic sales growth guidance 3% to 5%. U.S. expected to return to growth in 2026 with progress in inventories, Q2 shelf resets, and innovation. Medium-term ambition 4% to 6%, expecting to be in the middle of that range based on current knowledge. Confidence in medium-term due to attractive categories, premiumization, low-income consumer opportunity, and productivity agenda.
• 2026 expects improvement in price volume mix, with focus on driving volume growth in North America through actions like no longer destocking, reducing drag from smokers health, and distribution builds from shelf resets.

Q: On organic sales growth guidance of 3% to 5% for 2026, what are the main drivers and confidence in medium-term 4% to 6% despite 2 consecutive years below bottom end?

A: 2026 drivers include driving category growth, investment in A&P, innovation, sharper commercial execution. Medium-term confidence due to attractive categories, premiumization, low-income consumer opportunity, and productivity agenda.

Q: Talk about new reorganization as growth unlock and U.S. shelf resets?

A: Reorganization unlocks growth and agility, combines roles and creates operating units for quicker execution. In U.S., Q2 shelf resets expected for distribution and shelving wins in Oral Health, VMS, and Pain Relief.

Q: Sequential slowdown in emerging markets fourth quarter, differences in Oral Care vs other categories?

A: Oral Care has unique differentiation with over 10 years of growth, other categories affected by cold and flu, but innovation plans to underpin medium-term guidance. Emerging markets: Asia Pac strong with volume mix growth, India accelerated, China e-com and online to offline growing, EMEA, LatAm saw Q4 slowdown.

Q: Overall guidance vs margin improvement, volume level needed for 4% to 6% growth?

A: Investing in right places, A&P and R&D increased. Focus on driving volume growth, improving price volume mix, with Asia Pac volume mix driving growth, EMEA, LatAm expecting better mix outside Q1 and Q4, North America working on volume growth drivers.

Q: U.S. pharma channel pressure, ownership change at Walgreens, and market ex seasonality?

A: Channel shift to e-com manageable, Walgreens ownership change yet to be seen. Overall market: club and dollar channels doing better, focused on meeting consumer affordability with Oral Health driving category growth.

Q: Importance of cold and flu business in securing shelf space?

A: Cold and flu is important for consumer health, plays role in category management, and portfolio has common brands with pain, expected growth over time despite current headwinds.

Q: Digestive Health outlook for 2026 and pain franchise performance?

A: Digestive Health has opportunities with GLP-1s, Tums and Benefiber performing well. Pain Relief: Voltaren, Panadol, Advil with focus on new structure and investment to get back to consistent performance.

Q: Medium-term guidance reliance on U.S. or rest of world?

A: Expect U.S. to perform better, emerging markets to contribute, low-income consumer strategy taking hold, medium-term 4% to 6% based on strategy and opportunities, 2026 guidance 3% to 5% due to market uncertainty.

Q: Quantify U.S. shelf space stocking benefit and A&P effectiveness?

A: Not guiding to specific shelf space stocking benefit, but confident in progress. A&P increased, half to Oral Health, half to emerging markets, part to experts, focused on efficiency, effectiveness, and digital mix.