Unilever Q2 Earnings Call Highlights

Unilever Q2 Earnings Call Highlights

Unilever NYSE: UL reported accelerating volume-led growth in the second quarter, prompting the consumer products company to raise its full-year outlook as it expects pricing to become a larger contributor in the second half.

Underlying sales rose 4.8% in the first half, including 4.2% from volume and 0.6% from price, Chief Financial Officer Srinivas Phatak said on the company’s results call. Second-quarter underlying sales growth accelerated to 5.8%, driven by 5.5% volume growth, which management described as Unilever’s strongest quarterly volume performance since 2010.

First-half turnover was €25.6 billion, up 0.5% from a year earlier. Acquisitions net of disposals contributed 0.7% to turnover growth, while currency movements reduced turnover by 4.9%. Underlying operating profit rose 0.9% to €5.2 billion, and underlying earnings per share increased 2.4% to €1.61. Free cash flow increased €500 million year over year to €1.5 billion.

Power brands and home care drive growth Unilever said its power brands, which account for 78% of turnover, grew 6% in the first half and 6.9% in the second quarter. Second-quarter power-brand volume growth was 6.8%, with 15 of the company’s 30 power brands posting double-digit growth.

Beauty and Wellbeing recorded first-half underlying sales growth of 5.9%, accelerating to 8.1% in the second quarter. Hair care grew 9% during the half, supported by Dove, Sunsilk and K18. Vaseline posted double-digit growth, while the prestige beauty portfolio also accelerated, with Paula’s Choice, Hourglass and Tatcha each delivering double-digit growth in the second quarter. Personal Care grew 4.8% in the first half and 5.9% in the second quarter. Unilever said it regained market leadership in U.S. deodorants, supported by Dove, while Rexona returned to growth in Brazil after changes to format mix and shelf space. Home Care was the company’s fastest-growing business group, with underlying sales up 7.6% in the first half and 9.1% in the second quarter. Nearly all first-half growth came from volume. The segment benefited from strong fabric-cleaning growth in India, Brazil and Indonesia, as well as continued momentum in fabric enhancers led by Comfort. Foods grew 1.2% in the first half but slowed to 0.2% growth in the second quarter. Management cited weaker performance in North America and Europe, particularly in U.S. condiments, where it said increased competition in premium mayonnaise products using alternative oils, including avocado oil, hurt performance. The company said it is rolling out a Hellmann’s avocado line and adjusting pricing and distribution plans.

Emerging markets lead regional performance Emerging markets continued to be a key growth driver. Asia Pacific Africa delivered 7.3% underlying sales growth in the first half, with 6.1% from volume, while Latin America grew 7.6%, including 5.7% volume growth. India led the second-quarter performance, with 10% underlying sales growth. Management said the country achieved record market shares in laundry and hair care. China grew by a mid-single-digit rate, aided by digital and e-commerce channels, while Indonesia grew 7% on broad-based gains across business groups. North America grew 2.7% in the first half, with 3.2% volume growth, and growth accelerated to 3.6% in the second quarter. The company cited gains in deodorants, skin cleansing, hair care and prestige beauty. Europe declined 0.9% in the first half amid a softer market environment, with the weakness concentrated in Foods. Management said it had not seen a material divergence between sell-in and sell-out trends in the U.S.