Unilever PLC Q3 FY2025 earnings call

Management Statement and Operational Highlights:

• Unilever achieved 4% underlying sales growth (excluding Ice Cream) with 1.7% volume growth in the third quarter, broad-based across business groups. Power Brands (over 75% of turnover) grew 4.4%.
• Developed markets performed strongly: North America had 5.5% underlying sales growth driven by Personal Care and Wellbeing brands; Europe grew 1.1% despite a tough comparator. Asia Pacific Africa saw 6.8% underlying sales growth, with Indonesia returning to growth and China showing low single-digit growth.
• Latin America faced macro challenges but the business step up with 4.1% USG, though markets were soft. The Ice Cream demerger remains on track but timeline revised due to U.S. government shutdown; shareholders to receive Magnum Ice Cream shares on demerger completion.
• Power Brands like Vaseline, Liquid I.V., and Nutrafol had double-digit growth, and Dove, the biggest brand, continued to outperform with 6% USG in the quarter.

Segment Performance:

• Beauty & Wellbeing: Underlying sales grew 5.1%, driven by strong volume growth (2.3%) and price growth (2.7%). Key brands like Dove, Vaseline, Liquid I.V., and Nutrafol delivered strong performances, with double-digit volume-led growth in many cases.
• Personal Care: Underlying sales grew 4.1%, fueled by 1% volume growth and 3.1% price growth. Growth was driven by premium innovations in deodorants and skin cleansing, with Dove performing well and the acquisition of Dr. Squatch expanding presence in premium male grooming.
• Home Care: Underlying sales grew 3.1%, with 2.5% from volume and 0.6% from price. Cif and Domestos had double-digit growth, and the rollout of Wonder Wash continued to drive volume growth in Europe.
• Foods: Underlying sales grew 3.4%, with 1.3% from volume and 2.1% from price. Hellmann's maintained strong momentum with mid-single-digit growth, supported by performance in developed markets and Brazil.
• Ice Creams: Underlying sales grew 3.7%, with flat volume and 3.7% from price. Cornetto led with high single-digit growth, and Ben & Jerry's grew mid-single digits with new product launches.

Guidance:

• Unchanged outlook for underlying sales growth within the 3%-5% multiyear range, with second half growth ahead of the first half.
• Expect improvement in underlying operating margin, with second half margins of at least 18.5% (excluding Ice Cream).
• Unilever expected to pay Q4 dividend in full, ensuring continuity for shareholders through the Ice Cream demerger completion.

Risks:

• U.S. government shutdown impacted the timeline for the Ice Cream demerger, requiring revisions to the original schedule.
• Macro challenges in Latin America, including softness in Brazilian laundry and deodorants, and currency devaluation impacts.
• Commodity cost pressures, such as increasing palm oil and aluminum prices, which have implications for HPC liquids, personal care, and beauty products.

Question and Answer: Q: Warren Ackerman on North America's strong growth, Prestige/Wellbeing in North America, and Latin America's macro challenges.

A: Fernando Fernandez discussed North America's 5.5% underlying sales growth driven by Personal Care and Wellbeing, with Prestige Beauty showing mid-single-digit growth. For Latin America, addressed pricing actions in Brazil laundry and deodorants, noting learnings to avoid repetition in other EMs and expecting improvement in 2026.

Q: Guillaume at UBS on pricing outlook and Europe's volume growth.

A: Fernando and Srini Phatak discussed pricing considering benign commodity costs but wage inflation, and Europe's 1.1% underlying sales growth with a tough comparator but strong share gains.

Q: Olivier at Goldman Sachs on Hair Care in U.S. and Liquid I.V.'s global rollout.

A: Fernando mentioned TRESemmé's return to growth in Q3 and Liquid I.V. being rolled out to 8 markets with strong initial results.

Q: David Hayes on margins, Power Brands.

A: Fernando discussed Power Brands strategy focusing on 8 key brands in One Unilever markets, and Srini Phatak talked about margin outlook driven by volume growth, productivity, and portfolio/mix changes.

Q: Sarah Simon on U.S. government shutdown impact.

A: Fernando stated no significant impact on consumer sentiment seen in the U.S.

Q: Tom at Deutsche Bank on digital commerce and China's performance.

A: Fernando and Srini Phatak discussed digital commerce growth (e.g., Amazon, Walmart, TikTok) and China's improving performance with updates to go-to-market and premiumization efforts.

Q: Jeff Stent on Mexico, hard currency earnings.

A: Fernando discussed Mexico's macro challenges and Srini Phatak talked about hard currency earnings outlook supported by productivity and brand investment.

Q: Ed Lewis on Indonesia, China.

A: Fernando discussed Indonesia's progress with reset efforts and China's improving performance through go-to-market updates and premiumization.