Unilever PLC Earnings - Q4 2025 Analysis & Highlights
Unilever delivered solid 2025 results with underlying sales growth of 3.5% and margin expansion, while executing a major portfolio transformation including the Ice Cream demerger and strategic acquisitions. The company is guiding for 4% underlying sales growth in 2026 with continued margin improvement, supported by strong innovation pipelines and emerging market recovery.
Key Financial Results
Underlying sales growth of 3.5% for full year 2025, with volumes contributing 1.5% and price contributing 2%.
Turnover of €50.5 billion, down 3.8% versus prior year, driven by significant currency headwinds reducing turnover by 5.9%.
Underlying operating margin expanded by 60 basis points to 20% in 2025, reflecting a structurally strong margin profile.
Gross margin expanded by 20 basis points, marking the third consecutive year of gross margin expansion, with structurally higher level of 46.9% following Ice Cream demerger.
Underlying operating profit of €10.1 billion, a decline of 1.1% versus prior year.
Underlying EPS rose to €3.08, up 0.7% versus prior year, with sales growth and margin expansion contributing 6.5% to EPS growth.
On a constant currency basis, underlying earnings per share grew by 9.5%.
Free cash flow of €5.9 billion, representing 100% cash conversion, with €6.3 billion excluding demerger-related items.
Net debt of €23.1 billion, an absolute reduction of €1.4 billion following Ice Cream separation, with net debt to underlying EBITDA at 2 times.
Business Segment Results
Beauty & Wellbeing delivered underlying sales growth of 4.3% for full year, evenly split between volume of 2.2% and price of 2.1%, with underlying operating profit of €2.5 billion and margin of 19.2%.
Dove, Vaseline, and premium brands continued to outperform, delivering double-digit growth.
Vaseline delivered double-digit growth for the third consecutive year and became the eighth largest brand.
Liquid I.V. reached two important milestones, becoming a billion-dollar brand and achieving record US household penetration of over 18%.
OLLY is now an over $500 million brand with high single-digit growth.
Personal Care delivered underlying sales growth of 4.7% for full year with underlying operating profit of €3 billion and margin increased by 50 basis points to 22.6%.
Dove in Personal Care delivered high single-digit growth, with Whole Body Deos scaling across 15 markets.
Home Care delivered underlying sales growth of 2.6% for the year, primarily volume-led at 2.2%, with underlying operating profit of €1.7 billion and margin of 14.9%, up 40 basis points.
Wonder Wash established in more than 30 markets following its 2024 launch.
Foods delivered underlying sales growth of 2.5% for the year with record underlying operating margin increased by 130 basis points to 22.6%, with underlying operating profit of €2.9 billion.
Hellmann's delivered mid-single-digit volume-led growth, with flavored mayonnaise range scaled across more than 30 markets and established as €100 million platform.
Developed markets delivered underlying sales growth of 3.6% for the year, representing sustained outperformance versus market.
North America was a standout performer with underlying sales growth of 5.3% for the year, with volumes contributing 3.8%.
Europe delivered low single-digit underlying sales growth for the year.
Emerging markets delivered underlying sales growth of 3.5% for the year, with growth accelerating to 5.8% in fourth quarter.
Asia Pacific Africa delivered underlying sales growth of 4.6% for the year, with volumes contributing 3% and price 1.6%.
India underlying sales grew 4% for the year with volumes up 3%, accelerating to 5% in quarter four with volumes up 4%.
Indonesia underlying sales grew 4% for the year with sharp recovery in second half, accelerating to 17% growth in fourth quarter.
China underlying sales growth flat for the year with clear improvement in second half, including mid-single-digit growth in fourth quarter.
Latin America underlying sales grew 0.5% for the year, with price growth of 5.9% largely offsetting volume decline of 5.1%.
Capital Allocation
Returned €6 billion to shareholders in 2025, comprising €4.5 billion in dividends and €1.5 billion in share buybacks.
Capital allocation reflects 70/30 balance between dividends and share buybacks in principle.
Brand and marketing investment was 16.1% of turnover, the highest percentage in over a decade and 300 basis points higher than four years ago.
100% of incremental brand and marketing investment allocated behind Beauty & Wellbeing and Personal Care.
Capital expenditure was 3.1% of turnover, with more than half directed towards productivity and margin initiatives.
Announced new share buyback of €1.5 billion for 2026, reflecting confidence in balance sheet strength.
Productivity program delivered more than €670 million of savings and is well ahead of plan, with €800 million program expected to complete in 2026.
Portfolio Transformation
Ice Cream demerger completed, representing the most significant step in portfolio transformation.
10 transactions completed or announced during 2025, including acquisitions of Minimalist, Wild, and Dr. Squatch.
Acquisitions strengthened exposure to Beauty & Wellbeing and Personal Care premium segments and digitally native e-commerce-led brands with emphasis on US and India.
Completed exits from lower growth and non-core businesses, including Conimex, The Vegetarian Butcher, and Kate Somerville.
Announced further disposals such as Graze, Indonesia Tea, and Home Care business in Colombia and Ecuador.
Rotated 15% of total portfolio in 2025 through demerger, acquisitions, and disposals.
Dr. Squatch continuing to grow in double digit since acquisition in September 2025.
Macroeconomic Environment
Significant currency headwinds with FX reducing turnover by 5.9%, reflecting weaker US dollar and depreciation across emerging market currencies.
Soft markets in many parts of the world with challenging conditions expected to remain in 2026.
Consumer conditions softened, particularly in second half of 2025.
Broad-based market slowdown in Latin America amid ongoing macro and political uncertainty.
Weaker consumer demand in developed markets, particularly in Foods.
Weaker out-of-home consumption in China affecting Unilever Food Solutions performance.
Commodity inflation expected to be lower in 2026 than 2025, concentrated in palm, kernel oil, and surfactants.
Wage inflation occurring in markets requiring coverage through combination of productivity and pricing.
Some deflation in crude-related commodities and packaging.
Competitive Landscape
Power Brands representing 78% of group turnover continued to grow ahead of average, delivering 4.3% underlying sales growth for full year.
Power Brands delivering two-year compounded annual growth rate of 5%, including 3.4% volume growth.
Power Brands delivering 5.8% growth in fourth quarter, driven by volume growth of 3.5%.
Outperforming markets in developed markets despite consumer conditions softening.
Outperforming markets in emerging markets with improved execution and step-up in innovation.
Strong performance in digital commerce with double-digit growth in classic marketplace, social commerce, and quick commerce.
Brands like Dove and Vaseline have significant competitive advantage in online, with Dove growth in e-commerce practically two times overall growth.
Smaller brands able to scale big through e-commerce remain limited, with established brands maintaining competitive advantages.
Growth Opportunities and Strategies
Three fundamental shifts encompassing brands, organization, and people.
Desire at scale model elevating every stage of journey from product development through consumer engagement and retail execution.
Deploying AI to supercharge demand generation, scaling and hyper-targeting marketing content, and working with retailers on agentic shopping models.
New play-to-win philosophy for people with sharper targets, clearer accountability, higher potential rewards, and highest-ever differentiation between best and worst performers.
Seven growth priorities involving honing biggest growth opportunities across categories with more Beauty, Wellbeing, and Personal Care; across geographies with US and India as anchor markets; and across segments and channels focusing on premiumization and e-commerce.
Premium innovation driving category creation including powdered hydration, short-cycle laundry, probiotics in surface cleaning, and flavor mayo.
Excellent pillar of innovation for 2026 leveraging multi-year scientific streams with many Personal Care innovations activated alongside FIFA World Cup 2026 sponsorship.
Key metrics of volume growth, positive mix, and gross margin expansion to deliver earnings growth in hard currency.
Leveraging global strengths with emerging markets strengthening and developed markets continuing to outperform.
Perfect Store program ensuring pricing, assortment, and visibility properly managed homogeneously across Unilever.
US-for-US innovation model with huge focus on strengthened relationships with key retailers.
Corrective actions in Brazil including pricing restoration in Home Care and format mix adjustments in Deodorants.
Reset of business fundamentals in Indonesia with historic low stock levels in distributors and relaunched top eight brands.
Strengthened go-to-market execution and accelerating premiumization in China.
Financial Guidance and Outlook
Underlying sales growth expected at bottom end of multi-year range of 4% to 6% for full year 2026.
Underlying volume growth of at least 2% expected for 2026, maintaining focus on volume-led growth.
Confident of further modest improvement of underlying operating margin in 2026.
Structurally strong gross margin will continue to benefit from value chain interventions, fueling ongoing reinvestment into brands.
Inflationary pressures in select commodities expected in 2026, with overall inflation lower than 2025.
Margin progression outcome of choices, not short-term objective in itself.
Sustained, attractive, and growing dividends expected supported by strong cash generation.
Productivity savings of at least €130 million expected in 2026 to complete €800 million program.
SG&A costs and overhead costs expected to remain lower than turnover growth, with productivity becoming ongoing habit.
Gross margin expansion in 2026 likely to be higher than 2025.
Pricing expected around 2% level in 2026, slightly lower than long-run normal of around 3%.
Increased promotional spending particularly in Foods, but not dramatic.
No increase in promotional intensity in emerging markets.
Slightly higher currency headwinds in first half 2026 reflecting base period of 2025.
No material differences between first and second half from margin perspective.
Optimistic about emerging markets in 2026 with expected improvements in India, Indonesia, China, and Latin America.
Good start in North America in 2026 with market rebound in December and January.
Continued confidence in structural growth in Wellbeing verticals despite some slowdown in North America in quarter four.
Expect significant improvements in Brazil Deodorants during 2026 from corrective actions.
Expect better year in China in 2026 following interventions in route-to-market and e-commerce.
Expect improvements in Deos in Latin America from quarter two onward.
Expect UFS performance in China to improve during 2026.
