Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Unilever PLC (UL, Financial) achieved underlying sales growth of 4.1% in the first half of 2024, with volume growth contributing significantly.
- Gross margin expanded by 420 basis points to 45.7%, driven by lower material costs and tight cost control.
- Underlying operating profit increased by 17.1% to EUR 6.1 billion, with an operating margin improvement of 250 basis points to 19.6%.
- The company increased brand and marketing investment by nearly EUR 700 million, focusing on innovation and power brands.
- Unilever PLC (UL) made progress in sustainability initiatives, including climate targets, regenerative agriculture, and reducing plastic waste.
Negative Points
- The ice cream business underperformed, particularly in China and Europe, due to market conditions and poor weather.
- Despite operational improvements, the ice cream segment still faces significant challenges and requires further action.
- The Prestige beauty segment experienced a slowdown, particularly in the US market.
- Emerging market currencies and moderate return of commodity inflation pose potential risks to future financial performance.
- The company faces ongoing challenges in Indonesia, exacerbated by geopolitical tensions affecting consumer sentiment.
Q & A Highlights
Q: Hi, good morning. Thank you for taking my question. Maybe my first question is on the outlook for growth you mentioned 3% to 5%. You mentioned earlier that you expect volume to drive most of that. Are you still expecting volume growth to accelerate in the second half versus the Q2 level of 2.9%? And if so, can you talk about where this acceleration coming from? Because I think, Fernando, in your remarks, you mentioned that Argentina will be tougher. I think Indonesia as well will take time and the comps is also more difficult for the second half? And that's my first question.
A: Thank you, Celine, for the question. It's Hein. Appreciate it. What we'll do is I'll start with the first question on volume, and Fernando will take the question on the gross margin and EBIT margin. On volume, we have talked about our full year in the guidance 3% to 5%. We've talked about it being volume-led and volume to be the majority of our growth. And if you look at quarter two, that's exactly what's happening, and we expect a -- if you sort of take the first half year in terms of the percentage split, we expect roughly similar in the second half. And as we already said, we are sticking to our full-year guidance. So I would just take it as volume-led with no material changes in the split between volume and price as it stands today.
Q: Hi, good morning. I've got two questions, please. First of all, on US beauty, you mentioned that you were seeing US beauty category slowing down, particularly in skincare. Why do you think is the underlying reason there, and do you think it's structural? And how do you think it can change the trajectory for Paula's Choice? That's the first question.
A: Thanks, Olivier. Let me first talk about North America and the somewhat slowdown and the Prestige beauty side. That's indeed what we're seeing. And notably in Sephora and Ulta, those type of change. By the way, we also see it in China. We don't think it's structural. And I should also point to there's still different performance by brands. So some brands continue to beat the trend, and obviously, some brands are sort of more going with the trend. So what we do is we stick to it. We believe we have strong brands. We have strong presence in the channels that I talked about. Quite a few of our brands, as you know, are digitally native. So we're capable of investing more behind them and control that. So we feel that it's a very positive part of our business, and we will continue to invest, and we don't believe that it's really structural. It may last for a bit, but we don't see long-term prospects in that sense changing.
Q: Thank you very much. Morning all. It's not your sector, I know, Hein, but Carlsberg is acquiring Britvic, a predominantly UK company, in preference to allocating capital to emerging markets. Do you see any reason to be concerned about the medium- to longer-term trajectory for emerging markets?
A: Thanks for the question. If you look at it over the last couple of years, we have consistently invested capital in North America, behind our Prestige beauty business in particular, and behind our health and well-being business. Since the time that I've been here and together with Fernando, I mean, we've made some clear investment decisions there as well. We've acquired Yasso, we've acquired K18, and we believe that both of these brands fit us very well. So the way we look at it is, first of all, we're looking for brands that have the ability to scale across the globe. And North American brands tend to sort of have that opportunity to scale across a large geography, the US, and internationalize as well. So, that we think, is very attractive. Of course, it helps us on the hard currency side as well, which is important for us, and I think we've mentioned this a few times. But if the right opportunities would, of course, come along in geographies that are very important to us, think of India, for example, we will, of course, take a hard look. But I would call out those criteria. It should be strategically in the categories in which we play, or in the channels in which we play, should be capable to scale up, and should be in the geographies where we put our priority.
Q: Yeah, thank you. Morning. Firstly, just exploring the six Ps a bit. By the end of the year, what percentage of your portfolio will have some kind of renewal in it, either innovation or packaging change? I think you've highlighted packaging before as an area of particular gain for you. So what would that be by the end of the year? And what would your view be on how that should be on an annual basis compared to history?
A: Thanks, Tom, for the question. Let me first talk about unmissable brand superiority. So first of all, we believe that towards the end of the year, we will, I mean, in terms of the methodology, roughly two-thirds to 70% of the portfolio will -- we're looking at unmissable brand superiority as the sort of the primary benchmark for taking actions, and of course, to see if our actions lead to the right results. When you ask what is the -- what are we changing to -- what percentage of the portfolio will see change in terms of innovation and packaging? Well, I mean, if you look at unmissable brand superiority, we're looking at indeed six Ps. And of course, when we see gaps to where we need to be or where the consumer wants us to take action, of course, we take action. And the first results, I mean, we've tested it, we're rolling it out now. And when there is always something to improve, so I would say, essentially, on the whole assortment, we will continue to take actions, whether it's price, whether it's proposition, whether it's place, or whether it's an innovation. So I think that's sort of a dynamic thing, and we will continue to do that. When it comes to innovation, there, we have made a bit of a change. I mean, we have two goals. First of all, we want to make sure that the average size of our innovations in totality would double this year. And that means doing fewer, bigger, and better. The second thing that we've talked about on innovations is that we're very keen that we will grow a select set. Roughly, you have to think about somewhere between 10 and 12 to platforms of more than 100 million, and that's very important to make these bigger bets that we can scale across the globe. And we're on track on achieving that.
Q: Thank you, Jemma. And good morning. Two questions, if I may. The first one is, Heiko Schipper has now had a few months to get his feet under the nutrition desk. I'm just wondering if you could share on
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
