Unilever PLC

Good morning and welcome to Unilever's first quarter trading statement. Thank you for joining us. All of today's webcast is available live transcribed on the screen. I will be joined by Srini Patak, who took over as acting CFO in March. Srini has been a key partner for me as deputy CFO and group controller, having previously been a very successful industrial Unilever CFO. I am sure you will enjoy your interaction with Srini in the near future. It is a great honor to speak to you as CEO of Unilever. As this is my first quarterly announcement since becoming CEO, let me address upfront the question of the recent leadership change. As I have said on a number of occasions now, this was a forward-looking decision by the board. Organizationally, strategically, and operationally, we have made significant developments over recent years, all of which are helping to make Unilever a stronger, better-performing business. well prepared to face the future. Underpinning these big moves, there has been also a renewed focus inside the company on performance and executions, the effects of which we see reflected in improving competitiveness and improving results. In short, the fundamentals of the business are strong and we have good momentum. For the next phase of our transformation, our task is to make Unilever a world-class company in terms of brand demand creation and market execution. In a consumer goods environment where the traditional models of reach and persuasion are gone, these are the areas in which I have focused for most of my career, with a proven track record. In taking on the role, I have made clear that I will be a frontline CEO, driving the company to look outward and forward. What does that mean in practice? It means a ruthless obsession with the consumer, focusing on what it takes to drive demand and create desire at scale for our brands in an increasingly digitized world where consumer choice and expectations are greater than ever before. It means portfolio quality over portfolio scale, making sharper capital allocation choices to organically double down on our most profitable strongholds while enhancing the portfolio through disposals of non-strategic assets and bolt-on acquisitions in premium segments. It means building a marketing and sales machine that ensures the quality of our execution consistently matches the increasingly world-class quality of our innovation. It means completing our productivity program ahead of plan and establishing productivity as a habit to fuel investment behind our brands and build a virtuous circle of growth. And it means recapturing the spirit of pioneering that has defined Unilever for so much of its existence, but which, in recent times, we have lost by allowing ourselves to become too inwardly focused. These will be just some features of the frontline company that I intend to lead over the years ahead. Of course, as we look ahead, market conditions are likely to be volatile and uncertain, with the global economy probably operating below its long-term potential. for some time to come. But we are well prepared. The delivery in the first quarter of the year gives us confidence, putting the business on track for full year results in line with our guidance of 3-5% underlying sales growth. This confidence is based on several reasons. First, we have a resilient portfolio, good momentum, and above all, a very clear sense of what we need to do. Let me be clear. Top-line growth with a strong volume contribution is, and will be our absolute priority, whatever the economic environment. Second, we are putting a strong investment behind our brands as reflected by improving competitiveness and top-line growth. Third, the quality of our innovation pipeline is the backbone of our top-line growth. We see real evidence of this in the outperformance of our developed markets over the first quarter, with premium innovations driving growth in both the U.S., with examples like liquid IV and dab hair care relaunch, and in Europe, with the likes of Percy Wonder Wash and whole body deodorants. Fourth, we have taken decisive action to improve our position in key businesses like China and Indonesia. These are not quick fixes, but we are determined to stay the course, and we expect to see the benefit of the targeted interventions we have made in both China and Indonesia come through in results from the second half of 2025 onwards. And fifth, while the full picture on tariffs is still unfolding, our analysis suggests that at this stage, the direct impact on our business will be limited, given the capital allocated in recent years to the U.S. and supply chains that are predominantly local. Of course, the wider macroeconomic uncertainty will pose some risk and challenges to consumer confidence. But as I have said, we have a robust and resilient business well-placed to outperform. I will come back at the end to sum up and touch on the outlook. But for the moment, let me hand over to Shini to take you through the first quarter results in more detail.

Thank you, Fernando. I'm very happy to be here today with you for the first time as Unilever's acting chief financial officer. I joined the company in India as a chartered accountant and covered over the past 25 years all parts of the business and corporate finance. Most recently, as Fernando mentioned, as a deputy CFO and controller responsible for managing performance and stewardship for the group. I'm excited to partner Fernando to transform Unilever and drive significant value creation. And I look forward to meeting with you in the near future. That said, let's get into the quarter one 2025 performance. Underlying sales growth in the first quarter was 3%, a resilient performance in market conditions which were, as expected, more challenging. Underlying volume growth contributed 1.3%, led by good performance of personal care and beauty and well-being. Price growth continued to improve sequentially to 1.7% as a result of higher commodity costs than in the prior year. Underlying sales growth of our power brands, which contribute over 75% of our turnover, was in line with the group at 3%, with 1.2% from volume and 1.8% from price. The power brands continue to have the first call on incremental resources. They have the biggest growth potential, and we expect them to lead our growth. While our power brands in beauty and well-being, personal care, and ice creams delivered good growth, there were specific reasons why others were weaker in the first quarter. Across beauty and well-being, personal care, and ice creams, growth in our power brands was over 4%, led by premium innovations and a particularly strong delivery in developed markets. Many power brands in these businesses, including Vaseline, Liquid IV, and Magnum, grew well ahead of the Unilever average. Dove, our largest brand, grew over 8%. In home care and foods, power brand growth was impacted by some specific challenges to some markets. Home care's growth was lower in quarter one due to significant exposure to Brazil, where high real interest rates prompted retailer destocking, impacting laundry, more acutely. Additionally, exposure to China and Indonesia, where we are revamping our business, contributed to the slower growth. In foods, Power Brand's performance was affected by our food solutions business in China, which slapped a strong prior year comparator that benefited from the timing of Chinese New Year. Beauty and well-being underlying sales grew 4.1% with volume at 2.5% and price at 1.5%. Growth was driven by a strong well-being performance, while beauty categories were softer due to the market slowdown. Our core skincare business grew low single-digit, driven by volume. Dove and Vaseline performed strongly, backed by premium innovations. This was partially offset by modest growth in bonds and a decline of Glow and Lovely. Haircare was flat in the quarter, with varying performances by brand. Dove grew mid-single-digit, held by a relaunch which includes cutting-edge fiber repair technology, new packaging, and design. Nexus grew double-digit, held by the launch of its premium range. Our largest haircare brand, Sunsilk, was flat against a strong competitor, while Clear declined on the back of softer markets in China. Wellbeing, which accounted for around 18% of the business group in Q1, delivered another strong quarter, double-digit volume growth, led by Liquid IV and Neutrafol. This performance reflects continued strength in the brand's core products and innovations, as well as benefits of our selective international expansion. Prestige Beauty declined low single-digit, reflecting the slowdown in the beauty market. This weighed on the performance of our biggest brands, Dermalogica and Paula's Choice. While K18, a premium biotech hair care brand which we acquired in February 2024, and Hourglass, our premier color cosmetics brand, both grew double digit. Personal care had a good start to the year led by Dove, which represents around 40% of the business group and the continued good growth of deodorants fueled by a strong innovation program. Underlying sales growth was 5.1% with 2.7% volume and 2.4% price. Dove grew high single digit with continued success from premium innovations coming across skin cleansing, and deodorants. This included the serum shower collection and whole body deodorants. Having seen strong results in North America, where they were introduced in 2024, we are expanding these ranges into Europe, India, and other markets this year. Deodorants grew mid-single digit as a strong growth in North America was partially offset by softer performances of Rexona and Axe that have a large footprint in Latin America. Skin cleansing grew low single digit with positive volume and price. Tao Men Plus Care introduced a new range of premium naturals and relaunched its core range with updated packaging and design. This contributed to strong growth in North America and Europe. However, Lifebuoy declined due to challenging markets in Indonesia, China, and in India. In India, we are addressing the decline by relaunching the brand with an elevated proposition for skin protection. In March, We acquired Brandwild, which further enhances our personal care portfolio in naturals and premium spaces. Home care delivered underlying sales growth of 0.9%, driven by a 1% increase in volume. Growth was adversely impacted by macroeconomic challenges in key geographies. Europe grew high single-digit, driven by the success of multi-year innovation platforms, including the expansion of Purcell's WonderWash, which introduced new variants, color, and sensitive. We are continuing to roll it out to more markets and expect it to become a 100 million euro innovation in 2025. Comfort expanded the successful botanicals and elixir ranges. They utilize our patented crystal-fresh technology and bring superior fragrances to the fabric booster market. Commodity deflation, particularly for the powders format, resulted in negative pricing in 2024. Deflation has turned into inflation in 2025, and we are beginning to see a sequential improvement in underlying price growth. Our biggest home care category, fabric cleaning, declined a low single digit, navigating challenging market conditions in its biggest emerging markets. These include retailer destocking in Brazil, a market decline in China, and increased promotional intensity and price reductions in India, where we are responding to international competition trying to grow demand through pricing. Domestos and SIF grew well, benefiting from format innovations in power foams, sprays, and creams. At the end of the quarter, SIF launched its new infinite clean range powered by probiotics that continue to break down dirt and grime for up to three days. Foods delivered a competitively resilient performance amid slowing markets. Underlying sales growth was 1.6% in the first quarter, with volume at minus 1.1 and price growth at 2.7%. Our two biggest foods brands, Knorr, with more than 5 billion turnover, and Hellmann's, with around 3 billion turnover, performed well in retail. Knorr enhanced its global leadership in the bouillon and seasoning segments with new flavors, while Hellmann's grew mid single digit growth on the back of its premium and flavored mayo ranges, which are now available in 30 markets. North's growth in retail was partially offset by a softer food service channel. Our Unilever food solutions group was flat in the quarter. Sales in China, its largest market declined against a strong prior year comparator that benefited from a later Chinese New Year. We remain confident in the strength of our food service business in which we continue to expand our digital selling program and drive unique formats and sizes specifically designed for professional kitchens. In India, Growth in tea and coffee was offset by a decline of Horlicks. Importantly, we continue to work on simplifying our food's portfolio, anchoring it more on our power brands. We completed the sale of Cornemex in April. After announcing the disposals of Unox and Zwan in December, we announced the disposal of the Vegetarian Butcher in March. All the disposals will be completed during 2025. Ice creams delivered 4% underlying sales growth, being 1.8% from volume and 2.2% from price. The performance in the first quarter reflects good momentum, driven by strong innovation and ongoing operational improvements across much of our business. These include enhancements to our go-to-market strategy, supply chain, and promotional activities. They will strengthen our business and lay a foundation for continued improvements in the years ahead as an independent company. Magnum grew mid-single digit, supported by innovations such as the new Utopia range, featuring double cherry and double hazelnut flavors, and the expansion of successful platforms like Bon Bons, a bite-sized premium format that meets evolving snacking habits. Ben & Jerry's grew mid-single digit, held by the launch of a larger, more shareable size and new sundae flavors. We remain focused on strengthening our operational model while navigating the challenges brought by significant inflation in key materials like cocoa. We run the business through the lens of our five business groups. However, we believe it's also important to provide some color on performance across different geographies. Developed markets, which accounted for 42% of the group's turnover, grew underlying sales 4.5% with volumes of 3.3, the third consecutive quarter of growth above 4%. This reflected a strong performance in North America, led by beauty and well-being and personal care. North America grew 6.2% with volume up 4%, benefiting from multi-year transformation of our North American portfolio, which showed resilience during a period of declining consumer sentiment. Europe also delivered good growth, driven mainly by home care. A strong innovation pipeline and increased levels of brand investment are evidence of our commitment to accelerate performance consistently in these important hard currency markets. Growth in Latin America, one of Unilever's strongholds, slowed to 1.5% with volume declining 3%. Extremely high real interest rates are prompting retailers to reduce their stock in the region. We have navigated situations like this in the past. and as always are focused on protecting our leadership and boosting underlying sellout. In Asia Pacific Africa, our biggest region, underlying sales growth of 2% was also subdued. Our Indian business grew 3% driven by underlying volume growth in home care and beauty and well-being while increasing market share during a period of modest market growth. We expect conditions to improve in the midterm following recent fiscal and monetary stimulus. Our performance in Turkey was strong with double digit growth driven by positive volume and price. Africa had a more muted start to the year with a softer South Africa. China declined high single digit as a result of the broad based market weakness and the short term impacts of actions we are taking to strengthen our business for the long term. We are shifting our portfolio towards premium and super premium segments through innovations in our power brands. We are serving emerging channels better. through social first demand creation and setting up direct-to-consumer models, particularly in beauty and well-being. And we are transforming our go-to-market approach to serve smaller format stores in lower-tier cities, particularly benefiting volume for business groups like home care. We have redesigned the sales organization with separate sales teams and have leveraged digital selling tools for Salesforce and distributors to improve our reach. The transition to a tailored customer development organization and to a digital route to market takes time and required some corrections for stocks in some channels and categories. However, we are encouraged by the progress in line with our plans. Growth in Southeast Asia was muted as high single digit growth in the Philippines was offset by a 6.6% decline in Indonesia. We're making progress with the operational turnaround in Indonesia correcting misaligned pricing across channels, resetting stock levels in retail, and addressing long-standing portfolio issues. We have largely completed customer stock reductions and price harmonization. We are on track with the distributive trade digital transformation and with increasing the quality of our direct coverage through more and better stores. With an improved innovation pipeline and stronger operational foundations, We expect our businesses in both China and Indonesia to contribute to growth from the second half of the year. Let me now return to the performance at a group level. Turnover in the first quarter was 14.8 billion in euros, down 0.9% versus the prior year. Excluding the effect of M&A actions to further sharpen our portfolio, turnover growth in hard currency would be 1.8%, primarily driven by underlying sales growth of 3%. As a result of our portfolio actions, the net impact from acquisitions and disposals was a negative 2.7%. Acquisitions added 0.1%, driven by one month of K-18, which grew double-digit in the quarter. This was more than offset by a disposal effect of 2.8%, driven by Elida Beauty completed in June 2024, as well as Unilever Russia and our water purification business, all of which we completed in second half of 2024. The total currency moment in the quarter of negative 1.1% comprises a negative impact of 1.8% from euro, strengthening mainly against the key emerging market currencies, most notably in Latin America and Turkey, and a 0.7% of extreme price growth capping in hyperinflationary markets. The currency volatility has been heightened by tariff announcements. We currently assess that the impact of tariffs on our value chain will be limited and manageable. driven by the localized and flexible nature of our supply chain. We are evaluating all options, including localization and changes to material specifications to minimize the impact. If necessary, we'll also resort to price increases. Our full-year margin outlook takes into consideration the current expected impact of tariffs. Let me now turn to the separation of ice cream business, where we are well on track. The standalone business will be known as the Magnum Ice Cream Company. The demerger will take place in quarter four. As previously announced, this will be via listing in Amsterdam, London, and New York. The Magnum Ice Cream Company will be incorporated in the Netherlands and will continue to be headquartered in Amsterdam. We expect to complete the operational separation by 1st July, a complex process involving the legal entity setup, implementing the standalone operating model, and preparing the carve-out financials. Unilever will report ice cream as a discontinued operation from the fourth quarter. Ahead of its demerger, the Magnum Ice Cream Company will host a Capital Markets Day on 9th September, and we hope that many of you will be able to join us on that day. With that, over to you, Fernando.

Thank you, Srini. Turning to the outlook, we reconfirm our outlook for the full year 2025. Our absolute priority is driving top-line growth, and we expect underlying sales growth for full year 2025 to be within our range of 3% to 5%. We anticipate a modest improvement in underlying operating margin for the full year versus 18.4% in 2024, with half-one and half-two margins more balanced than in the prior year. The direct impact of tariffs on our profitability is expected to be limited and manageable. All this being said, We are conscious that the macroeconomic environment, currency stability, and consumer sentiment remain uncertain, and we will be agile to adjust plans if necessary. With that, let me sum up. In this uncertain environment, we believe we are taking the right actions to drive progress in 2025 and beyond. But we are not complacent. We are aware of the external forces we know are creating risk, whether the current macroeconomic uncertainty, the indirect impact of tariffs, not least on consumer sentiment, or the prospect of heightened commodity cost and forex volatility. However, we have a robust and resilient business, well placed to perform under such conditions. And as we look ahead to the rest of the year, we have good reasons to feel confident. We have built a portfolio that is diversified across geographies, categories, and price points, well positioned to respond to changing consumer demand patterns. We have what I believe is one of our strongest multiyear innovation pipelines in a long time, which we are landing flawlessly. This innovation program will continue to further improve our competitiveness. We are focused on brilliant in-market execution, supported by an organization that is now much more agile, more focused, and more accountable. The direct impact of tariffs on our business will be limited and manageable, although we will of course continue to monitor both the direct and indirect effects very, very carefully. And finally, we are confident we will benefit through the year from the targeted actions we have taken to improve our positions and drive performance in key emerging markets. It is for these reasons and more that we are confident, despite the current volatility, to reconfirm our full-year outlook for 2025. Thank you for your attention. We look forward now to taking your questions.