Unilever PLC Earnings - Q2 2026 Analysis & Highlights
Unilever delivered strong volume-led growth in the first half of 2026, driven by its "Desire at Scale" strategy and successful FIFA World Cup activations, while navigating significant commodity inflation and currency headwinds. The company upgraded its full-year guidance and expects pricing to lead growth in the second half as inflationary pressures persist.
Key Financial Results
First half turnover was €25.6 billion, up 0.5% year-over-year, with underlying sales growth of 4.8% including 4.2% from volume and 0.6% from price.
Second quarter underlying sales growth accelerated to 5.8% with volume growth of 5.5%, representing the best volume quarter in more than 15 years.
Underlying operating profit increased 0.9% to €5.2 billion, with strong operational performance offset by currency headwinds.
Underlying earnings per share increased 2.4% to €1.61, with operational performance contributing more than 7 percentage points of growth.
Underlying operating margin expanded 10 basis points to 20.3% despite a materially tougher cost environment.
Gross margins declined 70 basis points year-over-year due to inflation headwinds from the Middle East conflict and a calibrated approach to pricing, though they improved sequentially.
Free cash flow increased to €1.5 billion, up €0.5 billion versus the prior year, driven primarily by operating profit and strong working capital performance.
Currency reduced first half turnover by 4.9%, though this impact eased to 2.4% in the quarter as movements in the US dollar and emerging market currencies became less adverse.
Business Segment Results
Beauty & Wellbeing delivered 5.9% underlying sales growth with 4.5% from volume, accelerating to 8.1% growth in the second quarter with 6.9% volume growth.
Haircare led Beauty & Wellbeing performance with 9% underlying sales growth, with Dove, Sunsilk, and K18 delivering double-digit growth supported by innovation and premiumization.
Prestige beauty accelerated further in the second quarter with Paula's Choice, Hourglass, and Tatcha all delivering double-digit growth.
Personal Care delivered 4.8% underlying sales growth with 4.1% from volume, strengthening to 5.9% growth in the second quarter with 6.8% volume growth.
Deodorants grew across both developed and emerging markets, with the company regaining market leadership in the US after 2 years.
Home Care was the fastest-growing business group with 7.6% underlying sales growth and 8.6% volume growth in the second quarter, accelerating to 9.1% growth.
Fabric cleaning led Home Care performance with strong growth in India, Brazil, and Indonesia, with India delivering its strongest home care growth in 3 years.
Foods grew 1.2% in the first half, with growth slowing to 0.2% in the second quarter as emerging market strength was offset by weaker performance in North America and Europe.
Condiments performance was below expectations in the US due to increased competition in premium segments such as avocado oil mayonnaise.
Beauty & Wellbeing underlying operating profit increased 1% to €1.3 billion with underlying operating margin increasing 10 basis points to 19.5%.
Personal Care underlying operating profit increased 4.8% to €1.5 billion with underlying operating margin improving 10 basis points to 22.2%.
Home Care underlying operating margin increased 30 basis points to 15.8% despite commodity and currency headwinds.
Foods underlying operating profit was €1.5 billion, down 4.3%, with underlying operating margin unchanged at 23.3%.
Geographic Performance
Asia-Pacific Africa delivered 7.3% underlying sales growth with 6.1% from volume, with India accelerating to 10% growth in the second quarter.
India achieved record market share in both laundry and hair, growing more than 5% above the market average in laundry.
China grew mid single digit led by Beauty & Wellbeing, with growing presence in faster-growing digital and e-commerce channels supporting improvement despite a soft market.
Indonesia grew 7% with broad-based performance across business groups led by double-digit growth in home care and beauty & wellbeing.
Latin America delivered 7.6% growth with 5.7% volume, accelerating in the second quarter to 8.9% growth and 8.8% volume.
Brazil returned to strong volume-led growth as corrective actions restored competitiveness, led by fabric cleaning and improving momentum in deodorants.
North America grew 2.7% with 3.2% from volume, continuing to outperform the market, strengthening to 3.6% growth in the second quarter with 4.4% volume.
Europe declined 0.9% in the first half in a softer market environment with shortfall concentrated in foods.
Power Brands Performance
Power Brands grew 6% in the first half with 5.4% from volume, accelerating to 6.9% growth in the second quarter with 6.8% volume.
15 of 30 Power Brands grew in double digits in the second quarter, with Dove, Vaseline, K18, Hourglass, and Comfort particularly supported by innovation, premiumization, and stronger execution.
Dove grew 9% and is the company's largest brand with strong acceleration in emerging markets while the US continued outperforming.
Non-Power Brands returned to positive growth in the second quarter as the company continues to optimize tail brands while strongly supporting local jewels.
Capital Allocation
Second quarter dividend increased by 3%.
€1.5 billion share buyback program completed in June.
€6 billion of share buybacks expected between 2026 and 2029, supported by operational performance and transaction proceeds.
Acquisition of Grüns completed in June, a fast-growing US super greens supplements brand that increases exposure to premium, high-growth, and digitally-led consumer spaces.
Acquisitions net of disposals added 0.7% to turnover, with contributions from Dr. Squatch, Minimalist, Wild, and one month of Grüns.
Industry Trends and Dynamics
Market volume growth is approximately 1.5% at which Unilever is exposed, indicating the company is gaining share in many categories.
Emerging markets continued to be a strong growth engine with strong volume-led growth in the first half.
Powder hydration market continues to show solid market growth, with Unilever gaining competitive share gains in Amazon, Walmart, and the grocery channel.
Mayonnaise premium segment is developing around alternative oil formulations, particularly avocado oil ones, creating competitive challenges.
Chinese players are emerging in Southeast Asian markets, particularly in face care segments like TikTok Shop in Southeast Asia.
Competitive Landscape
Unilever regained market leadership in US deodorants after 2 years, addressing premium segment issues from previous years.
Company gained market share in many categories as volume growth significantly exceeds market growth rates.
Increased competition in US condiments, particularly in premium segments with alternative oil formulations, led to share losses.
Local competition in Asia suffered supply constraints, providing Unilever competitive advantage, particularly in laundry powder category.
Unilever was the most awarded advertiser at Cannes Festival of Creativity, receiving 35 awards demonstrating ability to create demand through cultural relevance.
Dove won 6 Cannes Lions for its partnership with Reddit during the launch of the Intensive Repair 10-in-1 Serum Hair Mask.
Macroeconomic Environment
Commodity inflation expected to total approximately €850 million for the full year, with €300 million impact in the first half and €550 million expected in the second half.
Inflation range estimated between €800 million and €900 million, with center point at €850 million, concentrated in home care with 70% emanating from emerging markets.
Commodity basket includes crude, vegetable oils, palm, SBO, packaging materials, LAB, and energy costs.
Middle East conflict created inflation headwinds affecting gross margins and cost environment.
Currency headwinds reduced first half turnover by 4.9%, though expected to improve to around 3% for the full year.
Brazil tax reform moving from 5 existing taxes to a dual VAT system starting in 2027, potentially causing market disruptions in Q4 2026 through destocking.
Brazil tax reform is revenue-neutral and should not fundamentally change business economics, though it may cause temporary P&L movements.
Growth Opportunities and Strategies
"Desire at Scale" growth operating system shapes how the company builds brands, innovates, activates in markets, and converts demand into sales.
SASSY framework combines science, standout aesthetics, superior product experience, social proof, and contemporary execution to elevate brand quality, reach, and relevance.
Frontline sales machine concept embeds activation programs and execution quality to new levels in every market.
FIFA World Cup activation activated 35 brands across more than 120 markets involving more than 50,000 content creators with combined audience of 600 million people and 180 limited-edition products.
House of Fresh creator hubs established in Mexico City, New York, and Miami to enable creators to build dedicated content from live events.
AI-enabled content at scale developed through AI studios to capture learnings for future sports marketing events.
Creator-first operating model leveraged through FIFA World Cup to strengthen brand equity and demand generation.
Premiumization strategy across brands like Dove and Vaseline, with Dove reaching approximately $20 territory and Vaseline at slightly lower levels in the US.
Portfolio transformation continuing with acquisition of Grüns and progress on combining foods with McCormick to make Unilever a focused pure play HPC company.
McCormick combination progressing well with more than 100 people working on separation and integration, secondary listing based in UK, and leadership announcements with 4 Unilever members on top table.
LLM rankings activated in more than 20 markets for more than 20 brands to ensure company is at forefront of how people discover brands.
General trade channel improvement in India now growing mid to high single digit, showing channel diversification opportunities.
Financial Guidance and Outlook
Full-year underlying sales growth expected within 4% to 6% range with around 3% underlying volume growth for the full year.
Second half growth expected at 4% to 5% led by pricing.
Underlying volume growth of around 3% expected for the full year, up from prior guidance of 2%.
Pricing expected to lead growth during second half as commodity-related pricing lands in the market and promotional spends normalize post-FIFA.
Modest improvement in underlying operating margin expected versus 2025.
Gross margins expected to remain at similar levels to first half on an absolute basis despite higher inflationary impact, with benefits of higher pricing landing in P&L.
Brand and marketing investments to remain competitive at 15% to 16% of turnover, with incremental investment focused on Power Brands.
Finance costs expected to remain below 3% of average net debt for the full year.
Underlying effective tax rate expected around 26% for the full year.
Inflationary pressures expected to continue in second half with heightened volatility, though company confident in managing while maintaining supply resilience.
Volume sensitivities expected as pricing lands in the second half.
Currency in second half expected to improve versus first half of 2026.
Strategic Portfolio Transformation
Foods business being combined with McCormick to reshape Unilever into a focused pure play HPC company.
Portfolio optimization continuing with divestment of businesses without sustainable positions, such as Colombia and Ecuador.
One Unilever markets now accretive to profitability after being dilutive previously, with strong overhead discipline and focused portfolio.
Exposure to premium channels like online increasing through growth of wellbeing, prestige, and premiumization in core business.
