Unilever PLC Earnings - Q2 2025 Analysis & Highlights

Key Takeaways

The Q2 2025 Unilever earnings call highlighted solid first-half performance, driven by balanced growth and margin improvements, with an optimistic outlook for the second half and beyond, focusing on volume growth, brand investment, and strategic portfolio shifts.

Key Financial Results

  • Underlying sales growth (USG) for the first half was 3.4%, with a balance of volume (1.5%) and price (1.9%).
  • Q2 2025 underlying sales growth was 3.8%, with volume growth of 1.8% and price growth of 2%.
  • Turnover for the first half was €30.1 billion, down 3.2% year-on-year, impacted by currency and net disposals.
  • Underlying operating margin was 19.3%, down 30 basis points, due to increased brand and marketing investment.
  • Brand and marketing investment increased by 40 basis points to 15.5% of turnover.
  • Underlying earnings per share was €1.59, a decline of 2.1%.
  • Free cash flow for the first half was €1.1 billion, compared to €2.2 billion in the prior year.
  • The company completed a €1.5 billion share buyback program.
  • The quarterly dividend for the second quarter is up 3% versus quarter two 2024 and in line with quarter one 2025 dividend.

    • Business Segment Results

  • Beauty & Wellbeing underlying sales growth was 3.7%, driven by 1.7% volume and 2% price.
  • Personal Care delivered 4.8% underlying sales growth, driven by 1.4% volume and 3.3% price.
  • Home Care underlying sales grew 1.3%, with 1.1% from volume and 0.2% from price.
  • Foods delivered competitive sales of 2.2%, with 0.3% from volume and 1.9% from price.
  • Ice Cream underlying sales grew 5.9%, driven by a 3.8% increase in volume and 2% price growth.

    • Capital Allocation

  • Unilever intends to retain a stake of just below 20% in the Magnum Ice Cream Company for up to five years.
  • The retained stake will be sold to pay for separation costs and maintain capital flexibility through a reduction in net debt.
  • The company expects a net debt-to-EBITDA ratio of approximately 2x for Unilever and around 2.4x for the Magnum Ice Cream Company.
  • Unilever intends to consolidate its share capital post the demerger of the Ice Cream Company.
  • The quarterly dividend for the second quarter is up 3% versus quarter two 2024 and in line with quarter one 2025 dividend.
  • The company completed its €1.5 billion share buyback program announced in February at the end of May.
  • At least 55% of capital expenditure is allocated towards margin-accretive initiatives.

    • Industry Trends and Dynamics

  • Developed markets continued to perform strongly, with first-half USG of 4.3%, driven by 3.4% volume and 0.9% price.
  • Emerging markets are showing a steadily improving picture, led by Asia Pacific Africa, which was up 3.5% in the first half and accelerated to over 5% growth in the second quarter.
  • Weakening economic conditions are impacting the business in Latin America, particularly in Brazil and Mexico.
  • The company is shifting resources towards premium, science-based innovation.

    • Competitive Landscape

  • The company continues to outperform markets in developed economies.
  • Share gains are seen across key categories, supported by premium innovations.
  • The company is focused on protecting leadership positions and restoring strategic pricing relativity where necessary.
  • Unilever is ranked number one supplier in Personal Care, number one in Foods, and number three in Beauty in the Advantage Survey.

    • Macroeconomic Environment

  • The macro and currency environment is expected to remain uncertain.
  • The currency impact on full-year turnover is expected to be between 5% and 6%, and around 20 basis points on underlying operating margin.
  • Inflationary pressures are faced from both commodities and currency, most notably in Ice Cream, Personal Care, and in Latin America.
  • Market growth across Latin America remained subdued, reflecting a challenging macroeconomic environment.

    • Growth Opportunities and Strategies

  • The company is shifting the portfolio towards Beauty & Wellbeing and Personal Care.
  • Focus is increasing on the two biggest markets: the United States and India.
  • The company is shifting resources decisively in the direction of premium, science-based innovation.
  • Operational excellence is being brought back to the heart of the business.
  • The company intends to retain a stake of just below 20% in the Magnum Ice Cream Company for up to five years.
  • The company is pursuing targeted acquisitions to sharpen portfolio focus and capture growth opportunities in attractive segments.
  • The company is focused on businesses with the potential to be scaled.

    • Financial Guidance and Outlook

  • Underlying sales growth is expected to be within the range of 3% to 5% for 2025.
  • Growth in the second half will outpace the first, supported by continued outperformance in developed markets and stronger momentum in emerging markets, particularly Asia.
  • An improvement in underlying operating margin is anticipated for the full year, with second-half margins of at least 18.5%.
  • The company expects free cash flow conversion of around 100%.
  • The underlying effective tax rate for the first half decreased to 25.2%, and full-year guidance remains unchanged at around 26%.
  • The company aims for multi-year volume growth of at least 2% and consistent gross margin expansion.